Exercise 22-11 Date Account Titles and Explanation Debit Credit (To correct for
ID: 2546920 • Letter: E
Question
Exercise 22-11
Date
Account Titles and Explanation
Debit
Credit
(To correct for the omission of depreciation expense in 2016.)
(To record depreciation expense for 2018.)
Exercise 22-11
Stellar Co. purchased a equipment on January 1, 2015, for $594,000. At that time, it was estimated that the equipment would have a 10-year life and no salvage value. On December 31, 2018, the firm’s accountant found that the entry for depreciation expense had been omitted in 2016. In addition, management has informed the accountant that the company plans to switch to straight-line depreciation, starting with the year 2018. At present, the company uses the sum-of-the-years’-digits method for depreciating equipment.Prepare the general journal entries that should be made at December 31, 2018, to record these events. (Ignore tax effects.) (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)
Date
Account Titles and Explanation
Debit
Credit
Dec. 31, 2018(To correct for the omission of depreciation expense in 2016.)
Dec. 31, 2018(To record depreciation expense for 2018.)
Explanation / Answer
Sum Of years Digit : 10+ 9 +8+7+6+5+4+3+2+1 = 55
Depreciation For 2015 : Depreciable basis * Remaining useful life /sum of years digit
= 594000 * 10 /55
= 108000
Depreciation for 2016 : 594000*9/55 = 97200
Depreciation for 2017 : 594000*8/55=86400
Total depreciation :108000+97200+86400 = 291600
Book value at beginning of 2018 :cost -accumulated depreciation
= 594000 -291600
= 302400
Remaining useful life :10 -3 = 7years
Depreciation from 2018 onwards : 302400/7= 43200
Date Account Debit credit December 31 2018 Retained earning 97200 Accumulated depreciation -equipment 97200 [To record omission of depreciation expense in 2016] december 31 2018 Depreciation expense 43200 Accumulated depreciation -equipment 43200 To record depreciation expense for 2018.)Related Questions
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