Question

Coronado Industries changed from the double-declining-balance to the straight-line method in 2018 on all its equipment. There was no change in the assets’ salvage values or useful lives. Plant assets, acquired on January 2, 2015, had an original cost of $1,670,400, with a $83,200 salvage value and an 8-year estimated useful life. Income before depreciation expense was $284,800 in 2017 and $342,400 in 2018.

A.)Prepare the journal entry to record depreciation expense in 2018.

B.) Starting with income before depreciation expense, prepare the remaining portion of the income statement for 2017 and 2018.

Answer 1

hi, please find below the answer let me know if you need any clarification -

Note : Change in depreciation method is change in accounting principle and is accounted prospectively
original cost		$1,670,400
salvage value		83,200
Depreciable value		1,587,200
Useful life		8
Annual depreciation		198400
	Year	Annual depreciation charged	Accumulated depreciation
	2015	198400	198400
	2016	198400	396800
	2017	198400	595200
Book value of asset at the end of 2017 or beginning of 2018 = 1670400-595200
			$1,075,200
Depreciation for 2018 under revised depreciation method
remaning usefull life = 8-3			5
Depreciation rate = 2*1/5			40%
Depreciation for 2018 = 1075200*40%			$430,080
Answer A)	journal entry to record depreciation expense in 2018.
Year	Account code			Dr	Cr
2018	Depreciation			$430,080
	Accumulated depreciation				$430,080
Answer B)	income statement for 2017 and 2018.
	Income statement
				2017	2018
i	Income before depreciation expense			284,800	342,400
ii	Depreciation			595200	$430,080
iii=iii	Income after depreciation			-310,400	-87,680