Flounder Enterprises Ltd. purchased machinery on January 1, 2015. The machinery cost $257,000, and was estimated...

Flounder Enterprises Ltd. purchased machinery on January 1, 2015. The machinery cost $257,000, and was estimated to have a ten-year useful life and a residual value of $70,000. Straight-line depreciation was recorded each year-end (December 31) to the end of December 31, 2019. On January 1, 2020, Flounder re-evaluated the machinery. It was now believed that the equipment’s total life was expected to be 15 years.

Prepare the journal entry to record depreciation for 2020.

Expert Solution

Solution

Date	Accounts title	Debit	Credit
Dec 31 2020	Depreciation expense-Machinery	$ 9,350
	Accumulated Depreciation - Machinery		$ 9,350
	(depreciation expense recorded)

Working

Straight line Method depreciation from year 2015 to 2019
A	Cost	$ 257,000
B	Residual Value	$ 70,000
C=A - B	Depreciable base	$ 187,000
D	Life [in years left ]	10
E=C/D	Annual SLM depreciation	$ 18,700.00

.

Depreciation schedule-Straight line method
Year	Book Value	Depreciation expense	Accumulated Depreciation	Ending Book Value
2015	$ 257,000.00	$ 18,700.00	$ 18,700.00	$ 238,300.00
2016	$ 238,300.00	$ 18,700.00	$ 37,400.00	$ 219,600.00
2017	$ 219,600.00	$ 18,700.00	$ 56,100.00	$ 200,900.00
2018	$ 200,900.00	$ 18,700.00	$ 74,800.00	$ 182,200.00
2019	$ 182,200.00	$ 18,700.00	$ 93,500.00	$ 163,500.00

.

Straight line Method for 2020 and onwards
A	Book value at the end of 2019	$ 163,500
B	Residual Value	$ 70,000
C=A - B	Depreciable base	$ 93,500
D	Life [in years left ] (15-5)	10
E=C/D	Annual SLM depreciation	$ 9,350.00

ekkarill92 answered 8 months ago

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