Gonzaga Company has used the double-declining-balance method for depreciation si

Question

Gonzaga Company has used the double-declining-balance method for depreciation since it started business in 2014. At the beginning of 2018, the company decided to change to the straight-line method. Depreciation as reported and what it would have been reported if the company had always used straight-line is listed below:

Straight-

   Year LIne DDB

   2014    32,000 64,000

   2015    35,000 50,000

   2016    39,000 58,000

   2017    39,000 48,000

Required:

What journal entry, if any, should Gonzaga make to record the effect of the accounting change (ignore income taxes)? Explain.

Explanation / Answer

Answer :

As per GAAP , change in method of depreciation is regarded as change in accounting estimate & such changes shal apply on prospectively basis & therefore no entry shall be recorded to give effect of the accounting change .

For the year 2018 the depreciation would be recorded as per straight-line method for the remaing useful life & on remaining undepreciated cost of assets.

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