Machinery purchased for $41,200 by Swifty Corp. on January 1, 2015, was originally estimated to have...

Machinery purchased for $41,200 by Swifty Corp. on January 1, 2015, was originally estimated to have an 8-year useful life with a residual value of $6,000. Depreciation has been entered for five years on this basis. In 2020, it is determined that the total estimated useful life (including 2020) should have been 10 years, with a residual value of $7,000 at the end of that time. Assume straight-line depreciation and that Swifty Corp. uses IFRS for financial statement purposes.

Prepare the entry that is required to correct the prior years’ depreciation, if any

Prepare the entry to record depreciation for 2020.

Repeat part (b) assuming Swifty Corp. uses ASPE and the machinery is originally estimated to have a physical life of 8.5 years and a salvage value of $0. In 2020, it is determined that the total estimated physical life (including 2020) should have been 11 years, with a salvage value of $400 at the end of that time.

Repeat part (b) assuming Swifty Corp. uses the double-declining-balance method of depreciation.

Expert Solution

Solution : A

Step : 1
Calulate carrying Amount of Assets

Cost Of Assets	41200
Less : Accumulated Depriciation
(41200 - 6000)/7 year = 4400 per year
Five year Depriciation= 4400*5 = 22000	-22000
Net Book Value as on Jan1 2020	19200

Step : 2
Computation of depriciation Using revised Method
Historical cost - Accumulated Depriciation - salvage value/remaining useful life
(41200-400)/8.5 year
2,440.00
Depriciation Applicable from Jan1 2010 Is $ 3420 Per Annum	2440

Solution : B

Step : 1
Calulate carrying Amount of Assets

Cost Of Assets	41200
Less : Accumulated Depriciation
(41200 - 6000)/7 year = 4400 per year
Five year Depriciation= 4400*5 = 22000	-22000
Net Book Value as on Jan1 2020	19200

Step : 2
Computation of depriciation Using revised Method
Historical cost - Accumulated Depriciation - salvage value/remaining useful life
(41200-22000-400)/8.5 year
2,211.76
Depriciation Applicable from Jan1 2010 Is $ 3420 Per Annum	2210

Solution : C

ekkarill92 answered 6 months ago

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