Question
In: Accounting
Pina Cole Inc. acquired the following assets in January of 2018. Equipment, estimated service life, 5...
Pina Cole Inc. acquired the following assets in January of
2018.
| Equipment, estimated service life, 5 years; salvage value, $15,200 | $525,200 | |
| Building, estimated service life, 30 years; no salvage value | $693,000 |
The equipment has been depreciated using the
sum-of-the-years’-digits method for the first 3 years for financial
reporting purposes. In 2021, the company decided to change the
method of computing depreciation to the straight-line method for
the equipment, but no change was made in the estimated service life
or salvage value. It was also decided to change the total estimated
service life of the building from 30 years to 40 years, with no
change in the estimated salvage value. The building is depreciated
on the straight-line method.
| (a) | Prepare the general journal entry to record depreciation expense for the equipment in 2021. | |
|---|---|---|
| (b) | Prepare the journal entry to record depreciation expense for the building in 2021. |
(Round answers to 0 decimal places, e.g. 125. 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.)
|
No. |
Account Titles and Explanation |
Debit |
Credit |
|---|---|---|---|
|
(a) |
Enter an account title |
Enter a debit amount |
Enter a credit amount |
|
Enter an account title |
Enter a debit amount |
Enter a credit amount |
|
|
(b) |
Enter an account title |
Enter a debit amount |
Enter a credit amount |
|
Enter an account title |
Enter a debit amount |
Enter a credit amount |
Solutions
Expert Solution
| Part-a - Journal Entry-Pina Cole Inc. | |||
| Date | Account Tittle | Debit | Credit |
| 2021 | Depreciation Expense (Working Note-1) | 51000 | |
| Accumulated Depreciation | 51000 | ||
| Working Note-1 |
| Depreciation as per SOYD for Equipemnt |
| Year-1 : (525200-15200)/15*5= $170000 |
| Year-2 : (525200-15200)/15*4= 136000 |
| Year-3 : (525200-15200)/15*3= 102000 |
| Accumulated Depreciaiton for 3 year = 408000 |
| Book Value on 2021 = Cost - Accumulated Depreciaiton for 3 year |
| =525200-408000= $117200 |
| Remaining useful Life= 2 year |
| Depreciation as per SLM= ($117200-15200)/2= $51000 |
| Part-b - Journal Entry-Pina Cole Inc. | |||
| Date | Account Tittle | Debit | Credit |
| 2021 | Depreciation Expense (Working Note-1) | 16857 | |
| Accumulated Depreciation | 16857 | ||
| Workign Note-2:- Building |
| Annual Depreication= 693000/30= $23100 |
| Depreciation for 3 year = 23100X3=69300 |
| Revised Depreciaiton = (693000-69300)/37= $16857 |
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