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In: Accounting

Yi Tech Inc. purchased a piece of equipment on 1/1/2016 for $20,000. At the time of...

Yi Tech Inc. purchased a piece of equipment on 1/1/2016 for $20,000. At the time of purchase the accountant estimated its useful life at 10 years and a salvage value of $1,000. The company uses straight-line depreciation.   On 1/1/18, the accountant changed the estimates. He decided a 5-year useful life with a $2,000 salvage value is more appropriate.

Note: This is considered a change in accounting estimate and will be reflected in the year the change was made in earnings (current year).

record the following journal entries recording Year-end Depreciation expense.

12-31-16      Dr._________________________________________       

           

                        Cr._________________________________________

12-31-17      Dr. _________________________________________

                       

                        Cr.__________________________________________

12-31-18      Dr. __________________________________________

                       

                        Cr.___________________________________________

12-31-19      Dr. ___________________________________________

                       

Cr.____________________________________________

12-31-20     Dr. ____________________________________________

                       

Cr.______________________________________________

Solutions

Expert Solution

the following are the required journal entries:

date accounts debit credit
12-31-16 Depreciation expense a/c $1,900
...........To Accumulated depreciation a/c $1,900
12-31-17 depreciation expense a/c $1,900
............To Accumulated depreciation a/c $1,900
12-31-18 Depreciation expense a/c $4,733.33
............To Accumulated depreciation a/c $4,733.33
12-31-19 Depreciation expense a/c $4,733,33
.............To Accumulated depreciation

$4,733.33

$
12-31-20 Depreciation a/c $4,733.33
. ............TO Accumulated depreciation a/c $4,733.33

working note:

depreciation in year 1 and year 2:

(cost - salvage value) / life

=> (20,000 - 1,000) / 10 years

=>$1,900.

now,

accumulated depreciation in years 1 and 2 =>$3,800.

now,

book value at end of year 2= $20,000 - 3,800

=>$16,200.

now,

depreciation for year 3 4 and 5

=>(book value - revised salvage value) / remaining years

=>(16,200 - 2,000) / 3

=>14,200 / 3

=>$4,733.33


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