Question

Problem 22-02 Marin Company is in the process of preparing its financial statements for 2020. Assume that no entries for depreciation have been recorded in 2020. The following information related to depreciation of fixed assets is provided to you. 1. Marin purchased equipment on January 2, 2017, for $80,500. At that time, the equipment had an estimated useful life of 10 years with a $4,500 salvage value. The equipment is depreciated on a straight-line basis. On January 2, 2020, as a result of additional information, the company determined that the equipment has a remaining useful life of 4 years with a $2,700 salvage value. 2. During 2020, Marin changed from the double-declining-balance method for its building to the straight-line method. The building originally cost $280,000. It had a useful life of 10 years and a salvage value of $28,000. The following computations present depreciation on both bases for 2018 and 2019. 2019 2018 Straight-line $25,200 $25,200 Declining-balance 44,800 56,000 3. Marin purchased a machine on July 1, 2018, at a cost of $130,000. The machine has a salvage value of $20,000 and a useful life of 8 years. Marin’s bookkeeper recorded straight-line depreciation in 2018 and 2019 but failed to consider the salvage value.

Prepare the journal entries to record depreciation expense for 2020 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.) No. Account Titles and Explanation Debit Credit 1. 2. 3. (To record current year depreciation.) (To correct prior year depreciation.) Show comparative net income for 2019 and 2020. Income before depreciation expense was $320,000 in 2020, and was $300,000 in 2019. (Ignore taxes.) MARIN COMPANY Comparative Income Statements For the Years 2020 and 2019 2020 2019 Income before depreciation expense $ $ Depreciation expense Net income $ $

Answer 1

No	Account Titles and Explanation	Debit	Credit
1	Depreciation expense	$13,750
	Accumulated Depreciation - Equipment		$13,750
	(To record current year depreciation.)
2	Depreciation expense	$30,100
	Accumulated Depreciation - Building		$30,100
	(To record current year depreciation.)
3	Depreciation expense	$13,750
	Accumulated Depreciation - Machinery		$13,750
	(To record current year depreciation.)
4	Accumulated Depreciation - Machinery	$    2,625
	Retained Earnings		$2,625
	(To correct prior year depreciation.)

SHERIDAN COMPANY
Comparative Income Statements
For the Years 2020 and 2019
	2020	2019
Income before depreciation expense	$320,000	$300,000
Depreciation expense	$57,600	$66,150
Net income	$262,400	$233,850

Depreciation Expense:-	2020	2019
Equipment	$13,750	$7,600
Building	$30,100	$44,800
Machinery	$13,750	$13,750
	$57,600	$66,150
	2018	2019
Depreciation recorded	$     8,125	$     16,250
Actual Depreciation	$     7,250	$     14,500
	$        875	$       1,750
	$                            2,625

Depreciation Expense:-	2020	2019
Equipment	=(80500-22800-2700)/4	=(80500-4500)/10
Building	=(280000--44800-56000-28000)/8	44800
Machinery	=(130000-20000)/8	=G14
	=SUM(G12:G14)	=SUM(H12:H14)
	2018	2019
Depreciation recorded	=(130000/8)*1/2	=(130000/8)
Actual Depreciation	=(130000-14000)/8/2	=(130000-14000)/8
	=G18-G19	=H18-H19
	=SUM(G20:H20)