Question

Wardell Company purchased a minicomputer on January 1, 2016, at a cost of $40,000. The computer was depreciated using the straight-line method over an estimated five-year life with an estimated residual value of $4,000. On January 1, 2018, the estimate of useful life was changed to a total of 10 years, and the estimate of residual value was changed to $900.

Required:

1. Prepare the year-end journal entry for depreciation in 2018. No depreciation was recorded during the year.

2. Repeat requirement 1 assuming that the company uses the sum-of-the-years’-digits method instead of the straight-line method.

Answer 1

Adjuhment joumal entry for depreciaton uin Calculahon el Book value en 2018 Depreciaton previded $40000-$4,000 $/200p easwet Boot vaue o Computet fu0,000-$(2x9,200) 1925,600 New Renidual value $900 Kemaining uthul tige in 2018, will change e, C10-2) - 8 years $25/600-1900f3087-50 Deprcciahen Enty $3,089.SD 3087-10 Depreciahon enpenge Accumulated depreciahon CBeing deprcciaton enty Recoded on evised terms) Cempamy uses Sum e) yeaas digit methaddinited o Stvaight line methat 2) -Rendual 1x Dechinang yoaus vaue Sum o yeau digit(Cost methad Sum o yoau Jum o yeauu ntNTI) Sx(6) Depreciodon (pu000-04000) 12/000 2016 (40,000-t4000) 9,600

Book value wn ao18fuo, cOo- (21000+9ten $18,400 tp Remaining li n 20188 yeau cto-2) Sx CPt) 36 Sum o yeaus Revired rendual value Depreciaton (in 2018) ($ 18,400-$900) x $3,889 36 Enty Debit cedi Pathiculau Deprecaahon eapente $3,889 $3,884 Accumulated depreciaton Being enty bor dapreeiohon has been ecods