Question

Additional Exercise 249

Hayden Company purchased a machine on January 1, 2018, at a cost of $90,000. It is expected to have an estimated salvage value of $5,000 at the end of its 5-year life. The company capitalized the machine and depreciated it in 2018 using the double-declining-balance method of depreciation. The company has a policy of using the straight-line method to depreciate machine but the company accountant neglected to follow company policy when he used the double-declining-balance method. Net income for the year ended December 31, 2018 was $55,000 as the result of depreciating the machine incorrectly.

Using the method of depreciation that the company normally follows, prepare the correcting entry. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Account Titles and Explanation	Debit	Credit

Determine the corrected net income.

Corrected net income

$

Answer 1

ANSWERS journal entry account titles and explanation debit credit ccumulated depreciation 19000 depreciation expense 19000 net income as given add: overstatement of depreciation expense corrected net income 55000 19000 74000

double declining bal method depreciation %= 200 % /5 4) 40% boobk value at asset book accumula end of ted dep 36000 value at beginning depreciation year 54,000 year 2018 90,000 36000 explanation straight line method explanation equipment 90,000 residual value 5,000 life years straight line depreciation - asset cost residual value) /life 17000 depreciation double declining depreciation straight line overstatement of depreciation 36000 17000 19000