In: Accounting
Alteran Corporation purchased office equipment for $1.7 million
at the beginning of 2019. The equipment is being depreciated over a
10-year life using the double-declining-balance method. The
residual value is expected to be $800,000. At the beginning of 2021
(two years later), Alteran decided to change to the straight-line
depreciation method for this equipment.
Prepare the journal entry to record depreciation for 2021.
(If no entry is required for a transaction/event, select
"No journal entry required" in the first account field. Do not
round intermediate calculations. Enter your answers in whole
dollars.)
Journal Entries In the Books Of Alteran Corporation
Date | Account Head & Explanation | Debit | Credit |
01 | Depreciation A/c.....Dr | $36,000 | |
Accumlated Depreciation A/c | $36,000 | ||
Depreciation Charged on Office . | |||
Working
Purchase Price of Offie - $ 1,700,000
Life of Office - 10Year
Residual Value - $ 800,000
Double Declining Rate = 100% /Estimated Life *2
= 100%/10*2 = 20%
Assets value in 2019 = 1,700,000
Less - Depreciation Charged @ 20% of 1700000 = (340,000)
Balance In 2020 = 1,360,000
Depreciation Charged @ 20%of 1360000 = (272,000)
Balance In 2021 = 1,088,000
Now Method of Depreciation Changes Here from Double Declining Rate Method to Straight Line Method
Now Value of Assets = 10,88,000
Estimated Life = 8 Years (because 2 Years already pased )
Residual value = 800,000
Now Depreciation for Year 2021 = Cost of Asset -Residual Value / Estimated Life in year
= 1,088,000-800,000/8 = 36000