Question

Described below are three independent and unrelated situations involving accounting changes. Each change occurs during 2021 before any adjusting entries or closing entries are prepared.

1. On December 30, 2017, Rival Industries acquired its office building at a cost of $10,200,000. It has been depreciated on a straight-line basis assuming a useful life of 40 years and no residual value. Early in 2021, the estimate of useful life was revised to 28 years in total with no change in residual value.
2. At the beginning of 2017, the Hoffman Group purchased office equipment at a cost of $360,000. Its useful life was estimated to be 10 years with no residual value. The equipment has been depreciated by the straight-line method. On January 1, 2021, the company changed to the double-declining-balance method.
3. At the beginning of 2021, Jantzen Specialties, which uses the straight-line method, changed to the double-declining-balance method for newly acquired vehicles. The change decreased current year net income by $455,000.

Required:

1. Identify the type of change.
2. Prepare any journal entry necessary as a direct result of the change as well as any adjusting entry for 2021 related to the situation described. (Ignore income tax effects.)

Answer 1

the chang a) This change is estimare no entry is needed to record a0a) adjusting ental I credit Debit 37740 Depreciation Expense (Note) 327400 Accumulated deprecation Note'- cost -> 10, 200,000 previous olepreciation 1,200,000 (765,000) 9435,000 + 25 yrs 140 (3774001 New annu al depreciation > 6) 122909 Depreciation Expense (note) 722909 Accumulated depreciation, SYD 2018 2017 Deprecation 3 60000 X 1055) 65454.5 PE0000 x 9153) — 58909-09 2019 5236.3.6 (360000 x 6155) 2020 (360000 755) 5.45818.18 Accumulated deprevakon 2 22,545 Cost - 360000 y Depreciation + (222345 737455/6yrs +22909 (10-490)