6. A plant asset is acquired by a business on January 1, 2016, for $100,000. The...

6. A plant asset is acquired by a business on January 1, 2016, for $100,000. The asset's estimated residual value is $10,000 and its estimated life is 5 years. Management chooses to use straight-line depreciation.

On January 1, 2018, management revises the total useful life to 8 years and the residual value to $5,000.

Required:

Compute the balance in Accumulated Depreciation on January 1, 2018.

Compute the Depreciation Expense for the year ending December 31, 2018.

Compute the balance in Accumulated Depreciation on December 31, 2018.

Prepare the adjusting journal entry on December 31, 2018 for the year. Omit the explanation.

Solutions

Expert Solution

Cost in whole in 2016	a	100,000
Salvage value	b	10,000
Depreciable value	c = a-b	90,000
Depreciation per year	d = c/5	18,000
Depreciation for 2 full years	e = d*2	36,000
Book value at the end of 2 years	f = a-e	64,000	Accumulated Depreciation on January 1, 2018.
New useful life	g	8
Revised salvage value	h	5,000
New depreciation value	I = f-h	59,000
New depreciation per year	j = i/6	9,833.33	Depreciation Expense for the year ending December 31, 2018
Balance in accumulated depreciation on 2018 December	k = f+j	73,833.33	balance in Accumulated Depreciation on December 31, 2018

Adjusting entry

Debit depreciation expenses	9,833
Credit Accum. Dep - Equipments		9,833

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ekkarill92 answered 1 year ago

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