During 2016 and 2017, Faulkner Manufacturing used the sum-of-the-years’-digits (SYD) method of depreciation for its depreciable...

During 2016 and 2017, Faulkner Manufacturing used the sum-of-the-years’-digits (SYD) method of depreciation for its depreciable assets, for both financial reporting and tax purposes. At the beginning of 2018, Faulkner decided to change to the straight-line method for both financial reporting and tax purposes. A tax rate of 40% is in effect for all years.

For an asset that cost $16,000 with an estimated residual value of $1,000 and an estimated useful life of 10 years, the depreciation under different methods is as follows:

Year	Straight Line			SYD		Difference
2016		$	1,500	$	2,727		$	1,227
2017			1,500		2,455			955
		$	3,000	$	5,182		$	2,182

Required:
1. Prepare the journal entry that Faulkner will record in 2018 related to the change.
2. Suppose instead that Faulkner previously used straight-line depreciation and changed to sum-of-the-years’- digits in 2018. Prepare the journal entry that Faulkner will record in 2018 related to the change.

Expert Solution

ekkarill92 answered 2 years ago

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During 2016 and 2017, Faulkner Manufacturing used the sum-of-the-years’-digits (SYD) method of depreciation for its depreciable...

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