Question

In: Accounting

A company purchased a piece of equipment for $40,000 on January 1, 2018. At that time...

A company purchased a piece of equipment for $40,000 on January 1, 2018. At that time the company estimated the equipment would have a 6-year useful life and no salvage value. The company used straight-line depreciation based on this information used through 2019. On December 31, 2020, the company determined the equipment instead has a 9-year useful life, with no salvage value. The company's tax rate has been 20% since 2015. What is the necessary adjustment to beginning retained earnings in 2020 for this change?

Solutions

Expert Solution

Jan 01 2018 Asset 40000 2020 Op.Balance 26666
Life 6 Years Revised Life Span 9 Years
Salvage Value Nil Salvage Value Nil
Straight Line Dep Op.Balance of Asset-Revised Residual Value/Remaining Life Span of Asset
Reamining Life Span 7 Years
Straight Line Dep 6666.667 Revised Monthly Depreciateion 3809.429
Machinery Dep Cl.Balance
2018 40000 6667 33333
2019 33333 6667 26666
2020 26666 3809 22857
2021 22857 3809 19048
2022 19048 3809 15239
2023 15239 3809 11430
2024 11430 3809 7621
2025 7621 3809 3812
2026 3812 3809 3
B) Due to to the revised computaion the reatined earnings for Year 2020 could Increase by an Amount 2858
where as previous depreciation was 6667 now it reduced to 3809
and need to pay tax on 2858 @20%
Equals to 571.6

ekkarill92 answered 1 year ago
Next > < Previous

Related Solutions

A company purchased a piece of manufacturing equipment for $30,000 on January 1, 2018. At that...
A company purchased a piece of manufacturing equipment for $30,000 on January 1, 2018. At that time, the company estimated the equipment would have a 7-year useful life and no salvage value. The company used straight-line depreciation based on this information through 2019. On December 31, 2020, the company determined the equipment instead has a 10-year useful life, with no salvage value. The company’s tax rate has been 30% since 2015. What is the necessary adjustment to beginning retained earnings...
On January 1, 2018, Aylmer Inc purchased a piece of equipment. The equipment is expected to...
On January 1, 2018, Aylmer Inc purchased a piece of equipment. The equipment is expected to produce 25,000 units over it's useful life. The equipment cost $520,000. Units produced: Other IMPORTANT information: 2018 3000 Fair value at: 2019 3200 31-Dec-20 $       306,500 2020 3800 2021 4300 Balance in Revaluation Surplus: $            1,375 2022 3700 2023 3600 2024 3600 REQUIRED: Prepare all necessary journal entries at: 01-Jan-18 31-Dec-18 31-Dec-19 31-Dec-20 The units each year is posted. This is the only information...
On January 1, 2018, Iron Limited purchased a piece of equipment for production of goods. The...
On January 1, 2018, Iron Limited purchased a piece of equipment for production of goods. The purchase price of the equipment was $670,000. Iron Limited paid on the date of purchase by the issue of ordinary shares. Iron Limited estimated that the equipment has an expected useful life of 4 years with a residual value of $30,000 on December 31, 2021. On February 15, 2020, Iron Limited disposed of equipment for cash amount of $358,000. Iron Limited adopts revaluation model...
Question 1 Part a On January 1, 2018, Iron Limited purchased a piece of equipment for...
Question 1 Part a On January 1, 2018, Iron Limited purchased a piece of equipment for production of goods. The purchase price of the equipment was $670,000. Iron Limited paid on the date of purchase by the issue of ordinary shares. Iron Limited estimated that the equipment has an expected useful life of 4 years with a residual value of $30,000 on December 31, 2021. On February 15, 2020, Iron Limited disposed of equipment for cash amount of $358,000. Iron...
1. On January 1, 2019, ABC Company purchased a new piece of equipment. The equipment was...
1. On January 1, 2019, ABC Company purchased a new piece of equipment. The equipment was assigned a $7,000 residual value and is expected to produce a total of 60,000 units over its life. The depreciation expense reported on the equipment for 2019 was $10,734. During 2020, the equipment was used to produce 9,000 units. At December 31, 2020, the book value of the equipment was $57,466. ABC Company is using the units-of-production depreciation method to depreciate the equipment. Calculate...
On January 1, 20x2, Astro Ltd. purchased a piece of equipment costing $84816. At the time,...
On January 1, 20x2, Astro Ltd. purchased a piece of equipment costing $84816. At the time, the equipment’s useful life was expected to be 8 years with an estimated residual value of $15821. In 20x6, these estimates were revised: the total estimated useful life of the equipment is expected to be 12 years and the residual value is expected to be $11736. What will the depreciation expense be for 20x6? Assume the company uses straight-line depreciation.
On January 1, 2018, Harlow Company paid $156,000 to purchase a piece of equipment. Before the...
On January 1, 2018, Harlow Company paid $156,000 to purchase a piece of equipment. Before the equipment could be used, Harlow had to spend $6,000 to put the equipment in working order. The equipment was assigned a useful life of 12 years and a salvage value of $9,000. The straight-line method will be used to record depreciation on the equipment. On January 1, 2025, Harlow Company decided the life of the equipment should be revised from 12 to 15 years...
On January 1, 2018, Harlow Company paid $156,000 to purchase a piece of equipment. Before the...
On January 1, 2018, Harlow Company paid $156,000 to purchase a piece of equipment. Before the equipment could be used, Harlow had to spend $6,000 to put the equipment in working order. The equipment was assigned a useful life of 12 years and a salvage value of $9,000. The straight-line method will be used to record depreciation on the equipment. On January 1, 2025, Harlow Company decided the life of the equipment should be revised from 12 to 15 years...
A piece of equipment is purchased for $40,000 and has an estimated salvage value of $1,000...
A piece of equipment is purchased for $40,000 and has an estimated salvage value of $1,000 at the end of the recovery period, a recovery period is five years. Prepare a depreciation schedule for the piece of equipment using the straight-line method
Al’s Car Wash purchased a piece of equipment on October 1, 2018, for $27,000. The equipment...
Al’s Car Wash purchased a piece of equipment on October 1, 2018, for $27,000. The equipment has a useful life of four years and a residual value of $2,000. Compute the depreciation for 2020, accumulated depreciation at the end of 2020, and book value at the end of 2020 using the straight-line method.
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT