Question

Marigold Company purchased a computer system for $74,750 on January 1, 2019. It was depreciated based on a 7-year life and an $17,700 salvage value. On January 1, 2021, Marigold revised these estimates to a total useful life of 4 years and a salvage value of $9,400. Marigold uses straight-line depreciation.

Prepare Marigold’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

Depreciation under Straight line method
	depreciation = (Cost of the asset - Salvage Value)/ Useful life of asset
	= ($74,750 - $17,700)/7
	=$57050/7
	=$8150 per year
Depreciation Per Year = $8150

Depreciation for the years 2019 and 2020 = $8150 * 2 = $16,300

Book value at the beginning of year 2021 = $74750 - 16300

Book Value at the beginning of year 2021= $58,450

In the year 2021 the company has revised the total useful lifr of asset to 4 years. Therefore depreciation in 2021 is as follows :

Depreciation = ( Book Value at the beginning of Year - Salvage Value ) Remaining useful life

Depreciation = ($58,450 - $9400 ) / 2

= $49,050 / 2

Depreciation in 2021 = $24525

Journal Entry
Date	General Journal	Debit	Credit
31-Dec-21	Depereciation Expense	$24525
	Assset (Computer System )		$24525