Question

Sendal Industriewe gheline depreciation on all of its depreca t e. The company records depreciation expense at the end of each calendar year. On January 11, 2014, the company purchased a machine casting 320,000. The machine's life was estimated to be 12 years with an estimated du e of SIN.00. Dependio for partiyanis corded to the nearest month In 2015, after almost five years of experience with the machine, m apenent decided to visit ated life from 12 years to 20 year. No change was made in the imated resuwalue Ther e stimate of the fillife was decided to recording alder e n for the year ended December 31, 2015 Prepare journalisinchronological order for the eve n ing with the purchase of them chinay on my 11, 2014 Show w a y the recording of depo nexpensei 2014th 2018 2 What factors may have caused the company to of the machin e Access and explanations Cred

Answer 1

1. Change in accounting estimates are recorded prospectively. Hence, change in useful life of machinery will not have any adjustments for prior year depreciations.

Soluno! Date Accounts and explanations / Debit ($) Credit ($) 90,000 90,000 0- Jonill, 2014 Machinery Cash (Being machinery purchased] Chan 31, 14 Deprecation Expenses Accumulated Deprecation (Being depreciation for the year recorded) 6000 6000 0 31 15 Govo Depreciation Expornses . I Accumulated Depreciation (Being depreciation recorded) 6000 Dec 31 16 6000 Depreciation Exponses I Accumulated Depreciation (Being depreciation recorded) I 6ooo Dec 31, 17 Depreciation Expenses Accumulated depreciation (Being Depreciation recorded) 6000 3000 Dec 31'18 Depreciation Expenses L L Accumulated Depreciation 1 (Being Depreciation recorded) 3000 csil Scanned with cam Seafie

Note Calculation of Deprecation expenses. Cost of machinery = $90000 Estimated residual volume = $12,000 Estimated useful life = 12 years. Depreciation expenses p.9. - 20000 -18,000) 112 = $ 6ooo 27 Calculation of revined Depreciation expenses New estimated useful life = 20 years. less: Years completed (2014 to 17) = 4yo. - Remaining life 16 yrs Depreciation = (Historical cost - Acc. Dep) - Salvage Vola Remaining life - 390000 - (1000 x4) 5 – 18000 16 = $3000 p.a. cs Scanned with SamScanner-

Dr. Date | 12/3114 To Depreciation Expenses Porticular Amount Date I Particulars Acc. Dep. 6000 12/31/14 By Income Statement - Cro Amount (0 6000 12lsis To Acc. Dep. Good 12/315 By Income st 160oo 12/31/16 To Acc. Dep. 16000 12/31/16 By Income ft. 6000 12/31/17 To Acc. Dep. 6000 12/3/12 By Income st. 6000 12/3/18 To Acc. Dep. | 3000 12/31/18 By Income ft. | 3000 Scanned with Tom Scanner

2. Factors that may invoke revision of above estimates can be the following:

1. Change in use and application of asset e.g. working for less hours, used by trained workers.
2. New information obtained that is different from previous estimates and expectations.
3. Less damage resulting in longer useful life.