Question

Required information [The following information applies to the questions displayed below.) Wardell Company purchased a mainframe on January 1, 2019, at a cost of $49,000. The computer was depreciated using the straight-line method over an estimated five-year life with an estimated residual value of $7,000. On January 1, 2021, the estimate of useful life was changed to a total of 10 years, and the estimate of residual value was changed to $400. 2. Prepare the year-end journal entry for depreciation in 2021. Assume that the company uses the sum-of-the-years' -digits method instead of the straight-line method. (If no entry is required for a transaction/event, select "No journal entry required in the first account field. Do not round intermediate calculations. Round your final answers to nearest whole dollar.) View transaction list View journal entry worksheet No Event Debit Credit General Journal Depreciation expense Accumulated depreciation—computer

Answer 1

Before the change:

Depreciation expense (SL method) = (Cost – Salvage value) / Estimated life years

                                                         = (49,000 – 7,000) / 5

                                                         = 42,000 / 5

                                                         = 8,400

Accumulated depreciation till 31/12/2020 = Depreciation expense × 2 years

                                                                    = 8,400 × 2

                                                                    = 16,800

After the change:

Estimated life = 10 years

Sum of the years = 1 + 2 + 3 + 4 + 5 + 6 + 7 + 8 + 9 + 10 = 55

Ratio of years in 2019 = 10/55

Ratio of years in 2020 = 9/55

Ratio of years in 2021 = 8/55

Depreciation base = Cost – Salvage value = 49,000 – 400 = 48,600

Year	Depreciation base (B)	Ratio (R)	Depreciation expense [B × R]	Accumulated depreciation
1	48,600	10/55	8836	8836
2	48,600	9/55	7952	8836 + 7952 = 16,788
3	48,600	8/55	7069	16,788 + 7069 = 23,857

Regarding the journal entry:

Accumulated depreciation is already there in the books of accounts as 16,800. The remaining amount (23,857 – 16,800 =) 7,057 should be entered now, on December 2021.

Journal

Event	General journal	Ref.	Debit	Credit
	Depreciation expense		$7,057
	Accumulated depreciation			$7,057