Question

Larkspur Company purchased a computer system for $78,300 on January 1, 2019. It was depreciated based on a 8-year life and an $17,900 salvage value. On January 1, 2021, Larkspur revised these estimates to a total useful life of 4 years and a salvage value of $10,200. Larkspur uses straight-line depreciation.

Prepare Larkspur’s entry to record 2021 depreciation expense. (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.)

Account Titles and Explanation	Debit	Credit
Enter an account title	Enter a debit amount	Enter a credit amount
Enter an account title	Enter a debit amount	Enter a credit amount

Answer 1

Cost of machine = $78,300

Salvage value = $17,900

Estimated useful life = 8 years

Annual depreciation expense = (Cost of machine - Salvage value)/Estimated useful life

= (78,300 – 17,900)/8

= 60,400/8

= $7,550

Accumulated depreciation for 2 years = Annual depreciation expense x 2

= 7,550 x 2

= $15,100

Book value at the end of year 2
Cost	78,300
Accumulated depreciation for 2 years	- 15,100
Book value at point of revision	$63,200

Book value at point of revision	63,200
Revised salvage value	- 10,200
Revised depreciable cost	$53,000
Remaining useful life	2 years
Annual depreciation for final 2 years	53,000/2 = $26,500

Journal

Date	Account Title and Explanation	Debit	Credit
Dec 31, 2021	Depreciation expense	26,500
	Accumulated depreciation expense		26,500
	(To record depreciation expense)