Depreciation Base = Total cost of machine - Residual value = $32 million - $2 million = $30 million.
Depreciation on machine using straight-line method = Depreciation base / Useful life = $30 million / 10 years = $ 3 million
Total depreciation over 3 years = $3 million * 3 years = $9 million.
Book value in the start of 2018 = Total cost - Accumulated depreciation = $32 million - $9 million = $23 million.
Year | Depreciation Base | Remaining life of machine | Depreciation fraction | Expense |
2015 | $30 million | 10 | 10/55 | $5,454,545,45 |
2016 | $30 million | 9 | 9/55 | $4,909,090.91 |
2017 | $30 million | 8 | 8/55 | $4,363,636.36 |
2018 | $30 million | 7 | 7/55 | |
2019 | $30 million | 6 | 6/55 | |
2020 | $30 million | 5 | 5/55 | |
2021 | $30 million | 4 | 4/55 | |
2022 | $30 million | 3 | 3/55 | |
2023 | $30 million | 2 | 2/55 | |
2024 | $30 million | 1 | 1/55 | |
55 |
Book value of machine in the beginning of 2018 = Total cost of machine - Depreciation using sum-of the years method = $32,000,000 - $$5,454,545,45 - $4,909,090.91 - $4,363,636.36 = $15,272,727.3
Depreciation booked less over the years to be booked in current year = Book value of machine using straight-line method - Book value using sum-of-the-years digit method = $23,000,000 - $15,272,727.3 = $7,727,272.7 or $7.73 millions
No | Event | General Journal | Debit ($ in millions) | Credit ($ in millions) |
1 | 1 | Depreciation expense | 7.73 | |
Accumulated Depreciation | 7.73 |
Irwin, Inc., constructed a machine at a total cost of $32 million. Construction was completed at...
Irwin, Inc., constructed a machine at a total cost of $32 million. Construction was completed at the end of 2014 and the machine was placed in service at the beginning of 2015. The machine was being depreciated over a 10-year life using the straight-line method. The residual value is expected to be $2 million. At the beginning of 2018, Irwin decided to change to the sum-of-the-years’-digits method. Ignoring income taxes, prepare the journal entry relating to the machine for 2018....
Irwin, Inc. constructed a machine at a total cost of $45 million. Construction was completed at the end of 2017 and the machine was placed in service at the beginning of 2018. The machine was being depreciated over a 10-year life using the sum-of-the-years’-digits method. The residual value is expected to be $1 million. At the beginning of 2021, Irwin decided to change to the straight-line method. Ignoring income taxes, prepare the journal entry relating to the machine for 2021....
Irwin, Inc. constructed a machine at a total cost of $44 million. Construction was completed at the end of 2017 and the machine was placed in service at the beginning of 2018. The machine was being depreciated over a 10-year life using the straight-line method. The residual value is expected to be $2 million. At the beginning of 2021, Irwin decided to change to the sum-of-the-years'-digits method. Ignoring income taxes, prepare the journal entry relating to the machine for 2021....
Irwin, Inc., constructed a machine at a total cost of $51 million. Construction was completed at the end of 2012 and the machine was placed in service at the beginning of 2013. The machine was being depreciated over a 10-year life using the straight-line method. The residual value is expected to be $3 million. At the beginning of 2016, Irwin decided to change to the sum-of-the-years’-digits method. Ignoring income taxes, prepare the journal entry relating to the machine for 2016.
Ch20 Homework i Hel Saved 2 Irwin, Inc., constructed a machine at a total cost of $57 million. Construction was completed at the end of 2014 and the machine was placed in service at the beginning of 2015. The machine was being depreciated over a 10-year life using the sum-of-the-years'-digits method. The residual value is expected to be $2 million. At the beginning of 2018, Irwin decided to change to the straight-line method. 16.66 gnoring income taxes, prepare the journal...
years’-digits method. The residual value is expected to be $3 million. At the beginning of 2018, Irwin decided to change to the straight-line method. Ignoring income taxes, prepare the journal entry relating to the machine for 2018.(If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions rounded to 1 decimal place (i.e., 5,500,000 should be entered as 5.5).) Brief Exercise 20-4 Change in depreciation methods [LO20-3]...
Alteran Corporation purchased office equipment for $1.7 million in 2015. The equipment is being depreciated over a 8-year life using the sum-of-the-years'-digits method. The residual value is expected to be $800,000. At the beginning of 2018, Alteran decided to change to the straight-line depreciation method for this equipment. Required: Prepare the journal entry to record depreciation for 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in...
In 2018, Internal auditors discovered that PKE Displays, Inc., had debited an expense account for the $444,000 cost of a machine purchased on January 1, 2015. The machine's useful life was expected to be six years with no residual value. Straight-line depreciation is used by PKE. Ignoring income taxes, prepare the journal entry PKE will use to correct the error (If no entry is required for a transaction/event, select "No Journal entry required in the first account field.) No Event...
In 2018, internal auditors discovered that PKE Displays, Inc., had debited an expense account for the $264,000 cost of a machine purchased on January 1, 2015. The machine’s useful life was expected to be four years with no residual value. Straight-line depreciation is used by PKE. Ignoring income taxes, prepare the journal entry PKE will use to correct the error. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
Wardell Company purchased a mainframe on January 1, 2016, at a cost of $58,000. The computer was depreciated using the straight- line method over an estimated five-year life with an estimated residual value of $16,000. On January 1, 2018, the estimate of useful life was changed to a total of 10 years, and the estimate of residual value was changed to $2,200. Required: 1. Prepare the year-end journal entry for depreciation in 2018. No depreciation was recorded during the year....