Question

Windsor Company is in the process of preparing its financial statements for 2017. Assume that no entries for depreciation have been recorded in 2017. The following information related to depreciation of fixed assets is provided to you. 1. Windsor purchased equipment on January 2, 2014, for $79,400. At that time, the equipment had an estimated useful life of 10 years with a $5,400 salvage value. The equipment is depreciated on a straight-line basis. On January 2, 2017, as a result of additional information, the company determined that the equipment has a remaining useful life of 4 years with a $2,900 salvage value. 2. During 2017, Windsor changed from the double-declining-balance method for its building to the straight-line method. The building originally cost $300,000. It had a useful life of 10 years and a salvage value of $30,000. The following computations present depreciation on both bases for 2015 and 2016. 2016 2015 Straight-line $27,000 $27,000 Declining-balance 48,000 60,000 3. Windsor purchased a machine on July 1, 2015, at a cost of $120,000. The machine has a salvage value of $18,000 and a useful life of 8 years. Windsor’s bookkeeper recorded straight-line depreciation in 2015 and 2016 but failed to consider the salvage value.

(a) Prepare the journal entries to record depreciation expense for 2017 and correct any errors made to date related to the information provided. (Ignore taxes.) (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.)

Answer 1

Answer :-

Journal entry:

Date	Particulars	debit	Credit
	Depreciation expenses	$13,575
	To accumulated depreciation		$13,575
	(Being equipment depreciation expenses recorded )
	Depreciation expenses	$20,250
	To accumulated depreciation		$20,250
	(Being building depreciation expenses recorded )
	Depreciation expenses	$12,000
	To accumulated depreciation		$12,000
	(Being machine depreciation expenses recorded )

1) Equipment :

Purchases on 2 Jan 2014 =$79,400

Salvage value =$5,400

Life =10 years

Depreciation = $79,400-$5,400/10

=7,400 per year

On 2 Jan 2017:

Salvage value =2,900

Life =4

Book value as on 2nd Jan 2017:

=($79,400-$7,400 *3)

=$57,200

depreciation thereafter = $57,200 - $2,900 /4

=13,575per year.

2) Building:

Cost of building	$300,000
Less: Depreciation
2015	($60,000)
2016	($48,000)
Book value	$192,000
Less: Salvage value	(30,000)
Depreciation cost	162,000
Remaining useful life	8 years
Depreciation per year	20,250

3) machine

Depreciation recorded in 2015 and 2016:

Machine cost =120,000

Useful life = 8 years

Depreciation =15,000

Book value on 2017 =120,000 -(15000*2)

=90,000

Salvage value =18,000

Depreciation cost =72,000

Life =6 years

Depreciation = 12,000