Question

Check my work accounting changes. Each change occurs during 2018 before any adjusting entries or closing entries are prepared. 2.14 points Skipped a. On December 30, 2014, Rival Industries acquired its office building at a cost of $11,500,000. It has been depreciated on a straight-line basis assuming a useful life of 40 years and no residual value. Early in 2018, the estimate of useful life was revised to 28 years in total with no change in residual value. b. At the beginning of 2014, the Hoffman Group purchased office equipment at a cost of $770,000. Its useful life was estimated to be 10 years with no residual value. The equipment has been depreciated by the sum-of-the- years'-digits method. On January 1, 2018, the company changed to the straight-line method. c. At the beginning of 2018, Jantzen Specialties, which uses the sum-of-the- years'-digits method, changed to the straight-line method for newly acquired buildings and equipment. The change increased current year net income by $595,000. eBook Print References 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 2018 related to the situation described. (Ignore income tax effects.) Complete this question by entering your answers in the tabs below. Required 1 Required 2 Identify the type of change. Situation Type of Change b. < Required 1 Required 2 >

Answer 1

a.
Type of Change = Change in Estimate
NO entry required as a direct result
Adjusting entry

Account Titles	Debit	Credit
Depreciation Expense	$     425,500
Accumulated Depreciation		$     425,500

Prior year’s depreciation: 11.500,000 ÷ 40 = 287,500/year x 3 years = $862,500
Depreciation expense [(11,500,000 – 862,500) ÷ 25] = 425,500

b.

Type of Change = Change in Accounting principle accounted for as change in estimate
NO entry required as a direct result
Adjusting entry

Account Titles	Debit	Credit
Depreciation Expense	$       49,000
Accumulated Depreciation		$       49,000

2014 depreciation:  770,000 x 10/55 = $  140,000
2015 depreciation:  770,000 x   9/55 =     126,000
2016 depreciation:  770,000 x   8/55 =     112,000
2017 depreciation:  770,000 x   7/55 = 98,000 $476,000

Depreciation expense [(770,000 – 476,000) ÷ 6] = 49,000

c.

Type of Change = Change in Accounting principle accounted for as change in estimate
NO entry required as a direct result
No entry as it is for new acquired building