Question

Exercise 22-11

Bridgeport Co. purchased a equipment on January 1, 2015, for $511,500. At that time, it was estimated that the equipment would have a 10-year life and no salvage value. On December 31, 2018, the firm’s accountant found that the entry for depreciation expense had been omitted in 2016. In addition, management has informed the accountant that the company plans to switch to straight-line depreciation, starting with the year 2018. At present, the company uses the sum-of-the-years’-digits method for depreciating equipment.

Prepare the general journal entries that should be made at December 31, 2018, to record these events. (Ignore tax effects.) (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.)

Date	Account Titles and Explanation	Debit	Credit
Dec. 31, 2018
	(To correct for the omission of depreciation expense in 2016.)
Dec. 31, 2018
	(To record depreciation expense for 2018.)

Answer 1

Date	Accounts Tittles and Explanations	Debit ($)	Credit ($)
Dec. 31, 2018	Depreciation Expenses A/c	$83,700
	To Accumulated Depreciation – Equipment A/c		$83,700
	[(To correct for the omission of depreciation expense in 2016.)
Dec. 31, 2018	Depreciation Expenses A/c	$37,200
	To Accumulated Depreciation – Equipment A/c		$37,200
	(To record depreciation expense for 2018.)

Depreciation Under Sum of years digits Method

= [ Cost of the asset – Salvage Value ] x No.of.years factor

2015 = $511,500 x 10/55 = $93,000

2016 = $511,500 x 9/55 = $83,700

2017 = $511,500 x 8/55 = $74,400

Total Accumulated Depreciation up to the end of Dec. 31, 2017

= $93,000 + 83,700 + 74,400

= $ 2,51,100

The Revised Book Value of the Equipment as on starting of the Year 2018

= $511,500 – 251,100

= $260,400

The Remaining useful life of the equipment

= 10 years – 3 Years already charged

= 7 Years

Straight line Depreciation from 2018 onwards

= $260,400 / 7 Years

= $37,200