Question

On July 1, 2019, Oriole Company purchased new equipment for $80,000. Its estimated useful life was 8 years with a $8,000 salvage value. On December 31, 2022, the company estimated that the equipment's remaining useful life was 10 years, with a revised salvage value of $5,000. Your answer is correct. Prepare the journal entry to record depreciation on December 31, 2019. (Credit account titles are automatically Indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry for the account titles and enter for the amounts.) Debit Credit Account Titles and Explanation Depreciation Expense Accumulated Depreciation-E 4.500 4.500 eTextbook and Media List of Accounts ✓ Your answer is correct. Prepare the journal entry to record depreciation on December 31, 2020. (Credit account titles are automatically Indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry for the account titles and enter for the amounts.) Debit Credit Account Titles and Explanation Depreciation Expense Accumulated Depreciation-E 9,000 9.000 eTextbook and Media List of Accounts Your answer is incorrect. Compute the revised annual depreciation on December 31, 2022. Revised annual depreciation $ 52.500 eTextbook and Media List of Accounts - Your answer is partially correct. Prepare the journal entry to record depreciation on December 31, 2022. (Credit account titles are automatically Indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry for the account titles and enter for the amounts.) Debit Credit Account Titles and Explanation Depreciation Expense Accumulated Depreciation-E 7,000 7,000 eTextbook and Media List of Accounts x Your answer is incorrect. Compute the balance in Accumulated Depreciation-Equipment for this equipment after depreciation expense has been recorded on December 31, 2022. Accumulated Depreciation-Equipment $ 57.500

Answer 1

Revision of salvage value and estimated useful life : If there is a change in the estimate of salvage value or estimated useful life then the effect of such revision in estimates is be considered prospectively i.e. the change in depreciation Expense is be recorded in the year in which depreciation changes and subsequent accounting periods

Revised Deprecation Expense = (Cost - Revised Salvage Value - Accumulated Depreciation)/ Revised Remaining Useful life

Straight Line Depreciation = (Cost - salvage value)/useful life Straight Line Depreciation = ($80000-$8000)/8 Straight Line Depreciation = $9000 Credit Date Dec 31, 2019 Debit $4,500 [$9000/2] [July 19 to Dec 19] $4,500 Dec 31, 2020 Account Title Depreciation Expense Accumulated Depreciation Equipment Depreciation Expense Accumulated Depreciation Equipment Depreciation Expense Accumulated Depreciation- Equipment $9,000 $9,000 Dec 31, 2021 $9,000 $9,000 Cost Less: Depreciation for 2019 Less: Depreciation for 2020 Less: Depreciation for 2021 Book Value as at Dec 2001 $80,000 ($4,500) ($9,000) ($9,000) $57,500 Book Value as at Dec 2001 Less: Revised Salvage Value Remaining Cost be depreciated Year of life remaining Depreciation for current year ($52500/10] $57,500 ($5,000) $52,500 10 $5,250 Credit Date Dec 31, 2022 Debit $5,250 General Journal Depreciation Expense Accumulated Depreciation- Equipment (To Record Depreciation for current year) $5,250 Accumulated Depreciation- Equipment $27,750