Question

Wardell Company purchased a mainframe on January 1, 2016, at a cost of $40,000. The computer was depreciated using the straight-line method over an estimated five-year life with an estimated residual value of $4,000. On January 1, 2018, the estimate of useful life was changed to a total of 10 years, and the estimate of residual value was changed to $400.

Required:
1. Prepare the year-end journal entry for depreciation in 2018. No depreciation was recorded during the year.
2. Prepare the year-end journal entry for depreciation in 2018. Assume that the company uses the sum-of-the-years' -digits method instead of the straight-line method.

Prepare the year-end journal entry for depreciation in 2018. No depreciation was recorded during the year. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Journal entry worksheet

• Record depreciation expense.

Note: Enter debits before credits.

Depreciation expense

	Event General Journal Debit Credit 1 Depreciation expense Accumulated depreciation—computer No journal entry required No journal entry required No journal entry required No journal entry required

Prepare the year-end journal entry for depreciation in 2018. Assume that the company uses the sum-of-the-years' -digits method instead of the straight-line method. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Journal entry worksheet

• Record depreciation expense.

Note: Enter debits before credits.

	Event General Journal Debit Credit 1 Depreciation expense Accumulated depreciation—computer No journal entry required No journal entry required No journal entry required No journal entry required

Answer 1

1) Journal entry

Accumulated depreciation on 2018 = (40000-4000/5*2) = 14400

Revised Dep on 2018 = (40000-14400-400)/8 = 3150

Date	account and explanation	debit	credit
	Depreciation expense	3150
	Accumulated Depreciation-Computer		3150
	(To record Dep)

2) Journal entry

Accumulated depreciation on 2018 = (40000-4000/9*15) = 21600

Revised Dep on 2018 = (40000-21600-400)*8/36 = 4000

Date	account and explanation	debit	credit
	Depreciation expense	4000
	Accumulated Depreciation-Computer		4000
	(To record Dep)