On January 1, 2013, Powell Company purchased a building and machinery that have

Question

On January 1, 2013, Powell Company purchased a building and machinery that have the following useful lives, salvage value, and costs.
Building, 25-year estimated useful life, $7,500,000 cost, $750,000 salvage value Machinery, 10-year estimated useful life, $950,000 cost, no salvage value
The building has been depreciated under the straight-line method through 2017. In 2018, the company decided to switch to the double-declining balance method of depreciation for the building. Powell also decided to change the total useful life of the machinery to 8 years, with a salvage value of $47,500 at the end of that time. The machinery is depreciated using the straight-line method. On January 1, 2013, Powell Company purchased a building and machinery that have the following useful lives, salvage value, and costs.
Building, 25-year estimated useful life, $7,500,000 cost, $750,000 salvage value Machinery, 10-year estimated useful life, $950,000 cost, no salvage value
The building has been depreciated under the straight-line method through 2017. In 2018, the company decided to switch to the double-declining balance method of depreciation for the building. Powell also decided to change the total useful life of the machinery to 8 years, with a salvage value of $47,500 at the end of that time. The machinery is depreciated using the straight-line method. Account Titles and Explanation Debit Credit Open Show Work SHOW LIST OF ACCOUNTS SHOW LIST OF ACCOUNTS SHOW LIST OF ACCOUNTS On January 1, 2013, Powell Company purchased a building and machinery that have the following useful lives, salvage value, and costs.
Building, 25-year estimated useful life, $7,500,000 cost, $750,000 salvage value Machinery, 10-year estimated useful life, $950,000 cost, no salvage value
The building has been depreciated under the straight-line method through 2017. In 2018, the company decided to switch to the double-declining balance method of depreciation for the building. Powell also decided to change the total useful life of the machinery to 8 years, with a salvage value of $47,500 at the end of that time. The machinery is depreciated using the straight-line method.

Explanation / Answer

a) Depreciation rate for building in 2017 =
$7500000 - $750000/25 = $270000 per year
Depreciation rate = 4%
Depreciation rate as per double declining balance method = 4*2 = 8%
Depreciation for the building in the 2nd year =( $7500000-$270000)*8% = $7230000*8% = $578400
Journal entry for the same
Depreciation expense $578400
   Building $578400


b) Year 1 depreciation for Machinery =
$950000/10 = $95000 per year
Written down value for the machinery in Year 2 = $950000-$95000 = $855000
Recalculated depreciation = Written down value/Useful life = $855000/8 = $106875
Depreciation expense for 2018 on machinery = $106875
Entry will be
Depreciation expense $106875
   Machinery $106875

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.