Question

Irwin, Inc., constructed a machine at a total cost of $58 million. Construction was completed at the end of 2014 and the machine was placed in service at the beginning of 2015. 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 $3 million. At the beginning of 2018, Irwin decided to change to the straight-line method. Ignoring income taxes, prepare the journal entry relating to the machine for 2018. (If no entry is required 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).)

Journal entry worksheet

Record the entry relating to the machine for 2018.

Note: Enter debits before credits.

	Event General Journal Debit Credit 1 Depreciation expense Accumulated depreciation

Answer 1

Sum of years digits Method
Life in years	10.00
Cost of Asset	58,000,000.00
Salavge Value	3,000,000.00
Depreciable Value =	55,000,000.00
sum of the years' digits depreciation calculation is = n(n+1)/2 = 10(10+1)/2 = 10*11/2 = 110/2 = 55
Year	Depreciation	WN
2,015.00	10,000,000.00	55m/55*10
2,016.00	9,000,000.00	55m/55*9
2,017.00	8,000,000.00	55m/55*8
	27,000,000.00
Carrying value at beginning of 2018=58m-27m	31,000,000.00
Residual value	3,000,000.00
Remaining life in years	7.00
Depreciation =(31m-3m)/7	4,000,000.00
	Debit	Credit
Depreciation expense Dr	4,000,000.00
To Accumulated depreciation		4,000,000.00