Question

Wardell Company purchased a mainframe on January 1, 2019, 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 $16,000. On January 1, 2021, the estimate of useful life was changed to a total of 10 years, and the estimate of residual value was changed to $2,200.

1. Prepare the year-end journal entry for depreciation in 2021. 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. Round your final answer to nearest whole dollar.)

Please show you how you did it.

General journal:

Debit Depreciation expense

Credit Accumulated depreciation-computer

I tried these answers: 4200 and 525. They were both wrong, so I don't know how to figure it out correctly.

Answer 1

1)
Date	Particulars	Debit ($)	Credit ($)
	Depreciation Expense	$ 4,875
	Accumulated Depreciation		$ 4,875
	(To record the Accumulated Depreciation )
	Workings:
	Book value    = Original cost (-) Accumulated Depreciation for 2 Years (-) Revised salvage value    =   $ 58,000   (-) [ ( $ 58,000 (-) $16,000 / 5 Years x 2) ] (-) $ 2,200    =    $ 58,000 (-)   $ 16,800 (-) $ 2,200    =     $ 39,000
	Depreciation expense   = Book value / Revised useful life = $ 39,000 / (10 - 2)                                                                                                                         =   $ 4,875