Question

Wardell Company purchased a minicomputer on January 1, 2016, at a cost of $58,000. The computer was depreciated using the straight-line method over an estimated five-year life with an estimated residual value of $10,000. 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 $2,200.

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.

Answer 1

Required 1
Event	General Journal				Debit	Credit
1
	Depreciation expense				4,575
	Accumulated Depreciation					4,575
	orginal cost					58,000
	Accumulated depreciation (58,000-10,000)/5*2					19200
	net book value on jan 1,2018					38,800
	Revised salvage value					2200
	book value to be depreciated					36,600
	Revised useful life 10 - 2					8
	Depreciation expense					4575
Required 2
Event	General Journal				Debit	Credit
1
	Depreciation expense				6,000
	Accumulated Depreciation					6,000
	original cost					58,000
	Accumulated depr (58000-10000)*5/15					16000
	Accumulated depr (58000-10000)*4/15					12800
	net book value on jan 1,2018					29,200
	Revised salvage value					2200
	book value to be depreciated					27,000
	Revised useful life 10 - 2					8
	Depreciation expense 27000*8/36					6000