Irwin, Inc., constructed a machine at a total cost of $68 million. Construction

Question

Irwin, Inc., constructed a machine at a total cost of $68 million. Construction was completed at the end of 2012 and the machine was placed in service at the beginning of 2013. The machine was being depreciated over a 10-year life using the sum-of-the-years'-digits method. The residual value is expected to be $2 million. At the beginning of 2016, Irwin decided to change to the straight-line method. Ignoring income taxes, prepare the journal entry relating to the for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).) View transaction list Journal entry worksheet Record the entry relating to the machine for 2016. Note: Enter debits before credits. Event General Journal Debit Credit Depreciation expense Accumulated depreciation Record entry Clear entry View general journal

Explanation / Answer

Year

Depreciation

2013

$12.00

2014

$10.80

2015

$9.60

figure in million Depreciation expenses $4.80 Accumulated depreciation $4.80 Explanation A change in depreciation method is considered a change in accounting estimate resulting from a change in accounting principle. In other words, a change in the depreciation method is similar to changing the economic useful life of a depreciable asset, and therefore the two events should be reported the same way. Accordingly, Irwin reports the change prospectively; previous financial statements are not revised. Instead, the company simply employs the straight-line method from then on. The undepreciated cost remaining at the time of the change would be depreciated straight line over the remaining useful life. figure in million Asset's cost $68.00 Accumulated depreciation to date $32.40 (calculated below). Undepreciated cost, Jan 1, 2016 $35.60 Estimated residual value -$2.00 To be depreciated over remaining 7 years $33.60 Annual straight-line depreciation2016-2022 $4.80 Calculation of SYD depreciation

Year

Depreciation

Expense

2013

$12.00

2014

$10.80

2015

$9.60

Total $32.40

Related Questions

Navigate

• Browse (All)
• Browse I
• Subjects

---

---

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