Question

The December 31, 2017, adjusted trial balance of Maritime Manufacturing showed the following information: Machinery Accumulated depreciation, machinery Office furniture Accumulated depreciation, office furniture $ 480,000 204,300 94,600 52,100 Remaining useful life four years, estimated residual $80,000 Remaining useful life five years, estimated residual $11,700 Early in 2018, the company made a decision to stop making the items produced by the machinery and buy the items instead. As a result, the remaining useful life was decreased to two years and the residual value was increased to a total of $100,000. At the beginning of 2018, it was determined that the estimated life of the office furniture should be reduced by two years and the residual value decreased by $7,000. The company calculates depreciation using the straight-line method to the nearest month. Required: Prepare the entries to record depreciation on the machinery and office furniture for the year ended December 31, 2018. (If no entry is required for a transaction/event, select "No journal entry required in the first account field. Round the final answer to the nearest whole dollars.) View transaction list

Answer 1

Depreciation = (Book value - Accumulated depreciation - Residual value) / Useful life

Depreciation on Machinery = ($480,000 - $204,300 - $100,000) / 2 = $87,850

Residual value of Office Furniture = $11,700 - $7,000 = $4,700

Useful life of Office Furniture = 5 years - 2 years = 3 years

Depreciation on Office Furniture = ($94,600 - $52,100 - $4,700) / 3 = $12,600

Date	General Journal	Debit	Credit
Dec 31, 2018	Depreciation expense	$87,850	-
	Accumulated depreciation, machinery	-	$87,850
	(To record depreciation on machinery)
Dec 31, 2018	Depreciation expense	$12,600	-
	Accumulated depreciation, office furniture	-	$12,600
	(To record depreciation on office furniture)