Ans. | Straight line depreciation (annual) = (Cost of asset - Residual value) / Useful life in years | |||
($444,000 - $0) / 6 | ||||
$74,000 | ||||
In 2018, the machine has already been used for 3 years (Jan. 2015 - Jan. 2018), so the | ||||
depreciation for these 3 years would be calculated as follows: | ||||
Accumulated depreciation (3 years) = $74,000 * 3 = $222,000 | ||||
Journal Entry: | ||||
No. | Event | General Journal | Debit | Credit |
1 | 1 | Equipment | $444,000 | |
Accumulated depreciation | $222,000 | |||
Retained earnings | $222,000 | |||
(To record a correction in depreciation) | ||||
*Equipment = Cost of machine | ||||
*Retained earnings = Cost of machine - Accumulated derpeciation | ||||
$444,000 - $222,000 = $222,000 | ||||
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