Question

Exercise 22-11

Cullumber Co. purchased a equipment on January 1, 2015, for $555,500. 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.)

Answer 1

Answer
Journal Entries
Date	Particulars	Dr Amount	Cr Amount
31.12.2018	Retained Earnings                                               Dr.	$       90,900
	To Accumulated Dep. - Machinery		$       90,900
	(To correct for the omission of dep. expense in 2013)
31.12.2015	Depreciation A/c                                                 Dr.	$       40,400
	To Accumulated Dep. - Machinery		$       40,400
	(To record depreciation expense for 2015)
Working Notes
	Amount of Dep. In 2016 = $555500 X 9/55 = $90900
	Cost Of machine		$     555,500
	Less: Dep. Prior to 2015
	2015 - $555500 X 10/55	$     101,000
	2016 - $555500 X 9/55	$       90,900
	2017 - $555500 X 8/55	$       80,800	$     272,700
	Book Value as on 01.01.2018		$     282,800
	Dep. For the 2018 : 282800 / 7 = $40400