Question

Described below are three independent and unrelated situations involving accounting changes. Each change occurs during 2021 before any adjusting entries or closing entries are prepared. a. On December 30, 2017, Rival Industries acquired its office building at a cost of $11,400,000. It has been depreciated on a straight-line basis assuming a useful life of 40 years and no residual value. Early in 2021, the estimate of useful life was revised to 28 years in total with no change in residual value. b. At the beginning of 2017, the Hoffman Group purchased office equipment at a cost of $612,000. Its useful life was estimated to be 10 years with no residual value. The equipment has been depreciated by the straight-line method. On January 1, 2021, the company changed to the double-declining-balance method. c. At the beginning of 2021, Jantzen Specialties, which uses the straight-line method, changed to the double-declining- balance method for newly acquired vehicles. The change decreased current year net income by $585,000. Required: 1. Identify the type of change. 2. Prepare any journal entry necessary as a direct result of the change as well as any adjusting entry for 2021 related to the situation described. (Ignore income tax effects.) Complete this question by entering your answers in the tabs below. Required Required 1 Identify the type of change. Type of Change Situation a. b. C. Required 1 Required 2 >
Just Requirement 2 Journal Entries please

Answer 1

1	Situation
	a	This is a change in estimate.
	b	This is a change in accounting principle that is accounted for as a change in estimate
	c	This is a change in accounting principle accounted for as a change in estimate
2	Date	General Journal	Debit	Credit
1	2021	No entry is needed to record the change.
2	2021	Depreciation expense	$421,800
		Accumulated depreciation		$421,800
	Working
		Cost	$11,400,000
		Previous depreciation ($11,400,000 ÷ 40 years) x 3 years	$855,000
		Undepreciated cost	$10,545,000
		Estimated remaining life (25 years: 2021–2045)	25 years
		New annual depreciation	$421,800
3	2021	No entry is needed to record the change.
4	2021	Depreciation expense	$38,946
		Accumulated depreciation		$38,946
	Working
		Cost	$612,000
		Previous depreciation	$378,327
		Undepreciated cost	$233,673
		Less: Salvage value	-
		Depreciable base	$233,673
		Remaining life (10 years–4 years)	6 years
		New annual depreciation	$38,946
	SYD
	2017	($612,000 x 10/55)	$111,273
	2018	($612,000 x 9/55)	$100,145
	2019	($612,000 x 8/55)	$89,018
	2020	($612,000 x 7/55)	$77,891
			$378,327
5	2021	No entry is needed to record the change.
		Because the change will be effective only for assets placed in service after the date of change,
		depreciation schedules do not require revision because the change does not affect assets
		depreciated in prior periods.