Question

Tiffs cookies Inc. purchased a piece of machinery on 1/1/2016 for $50,000. At the time of purchase the accountant estimated its useful life at 10 years and a salvage value of $5,000. The company uses Double Declining Depreciation (an accelerated method).   On 1/1/19, the accountant changed the company’s depreciation method to Straight-line.

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 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.____________________________________________________

12-31-21      Dr. ___________________________________________________

                       

                        Cr.____________________________________________________

12-31-22      Dr. ___________________________________________________

                       

                        Cr.____________________________________________________

12-31-23      Dr. ___________________________________________________

                       

                        Cr.____________________________________________________

12-31-24     Dr. ____________________________________________________

                       

                        Cr.____________________________________________________

12-31-25      Dr. ___________________________________________________

                       

                        Cr.____________________________________________________

Answer 1

		Estimated life in years	10
		Straight line method depreciation rate on (50000-5000)	0.1	(1/10)
		Double declining method recovery rate on year beginning book value	0.2	(2*0.1)
			A	B	C=A*B	A-B
		YEAR	Begining book value	Depreciation Rate	Depreciation amount	Ending book balance	Accumulated depreciation
		2016	$50,000	0.2	$10,000	$40,000	$10,000
		2017	$40,000	0.2	$8,000	$32,000	$18,000
		2018	$32,000	0.2	$6,400	$25,600	$24,400
		Annual depreciation as per Straight line method	$4,500	(50000-5000)*0.1
		Accumulated depreciation in 3 years	$13,500	(4500*3)
		Difference in accumulated deprecion in method of Straight line and Double declining	$10,900	(24400-13500)
		JOURNAL ENTRY
	Date	ACCOUNT TITLE	DEBIT	CREDIT
	12/31/2016	Depreciation expense	$10,000
		Accumulated depreciation		$10,000
	12/31/2017	Depreciation expense	$8,000
		Accumulated depreciation		$8,000
	12/31/2018	Depreciation expense	$6,400
		Accumulated depreciation		$6,400
	12/31/2019	Accumulated depreciation	$10,900
		Cumulative Effect of Change in Accounting Principle		$10,900
	12/31/2019	Depreciation expense	$4,500
		Accumulated depreciation		$4,500
	12/31/2020	Depreciation expense	$4,500
		Accumulated depreciation		$4,500
	12/31/2021	Depreciation expense	$4,500
		Accumulated depreciation		$4,500
	12/31/2022	Depreciation expense	$4,500
		Accumulated depreciation		$4,500
	12/31/2023	Depreciation expense	$4,500
		Accumulated depreciation		$4,500
	12/31/2024	Depreciation expense	$4,500
		Accumulated depreciation		$4,500
	12/31/2025	Depreciation expense	$4,500
		Accumulated depreciation		$4,500