Question

Pearl Co. purchased a equipment on January 1, 2015, for $506,000. At that time, it was estimated that the equipment would have a 10-year life and no salvage value. On December 31, 2018, the firm’s accountant found that the entry for depreciation expense had been omitted in 2016. In addition, management has informed the accountant that the company plans to switch to straight-line depreciation, starting with the year 2018. At present, the company uses the sum-of-the-years’-digits method for depreciating equipment. Prepare the general journal entries that should be made at December 31, 2018, to record these events. (Ignore tax effects.)

Answer 1

Answer
.
Cost of the machine	5,06,000
Sum of the year
Year	digits	Depreciation	WDV
2015	10	92,000	4,14,000
2016	9	82,800	3,31,200
2017	8	73,600	2,57,600
2018	7	64,400	1,93,200
2019	6	55,200	1,38,000
2020	5	46,000	92,000
2021	4	36,800	55,200
2022	3	27,600	27,600
2023	2	18,400	9,200
2024	1	9,200	-
	55

31-Dec-18
Depreciation	Dr	82,800
Accumulated depreciation - equipment	Cr		82,800
(To record depreciation omitted for 2016)
1.WDV as on 1st January 2018	2,57,600
2.Balance useful life (10 - 3)	7
3.SLM depreciation ( 1/2)	36,800	pa
31-Dec-18
Depreciation	Dr	36,800
Accumulated depreciation - equipment	Cr		36,800
(to record depreciation for the year 2018)