Universal Semiconductors switched from the double-declining-balance depreciation method to straight-line depreciation in 2021. The change affects...
Universal Semiconductors switched from the double-declining-balance depreciation method to straight-line depreciation in 2021.
- The change affects its precision equipment that was purchased at the beginning of 2019 at a cost of $50 million.
- The machinery has an expected useful life of ten years and an estimated residual value of $8 million.
Required:
Prepare the appropriate entry to record depreciation in 2021.
(If no entry is required for a transaction/event, select
"No journal entry required" in the first account
field.)
Record the depreciation of precision equipment costing $50 million with an expected useful life of ten years and an estimated residual value of $8 million in 2021.
Homework Answers
Depreciation entry for the year 2021
| Particulars | Debit | Credit |
| Depreciation | $ 31,50,000.00 | |
| Accumulated Depreciation | $ 31,50,000.00 |
Since change in depreciation method is only a change in accounting estimates, no retrospective change in depreciation is not required.
Working
Depreciation schedule till 2020
| Year | Opening WDV | Depreciation for the year (Note 1) | Closing WDV |
| 2019 | $ 5,00,00,000 | $ 84,00,000 | $ 4,16,00,000 |
| 2020 | $ 4,16,00,000 | $ 84,00,000 | $ 3,32,00,000 |
Note 1
| Particulars | Amount |
| Cost of the asset | $ 5,00,00,000 |
| Less: Salvage value | $ 80,00,000 |
| Depreciable amount (A) | $ 4,20,00,000 |
| Life of the asset (B) | 10 |
| Depreciation per year as per Straight line ('C) - A/B | $ 42,00,000 |
| Depreciation per year as per double declining balance - C*2 | $ 84,00,000 |
Depreciation schedule from 2021
| Year | Opening WDV | Depreciation for the year (Note 2) | Closing WDV |
| 2021 | $ 3,32,00,000 | $ 31,50,000 | $ 3,00,50,000 |
| 2022 | $ 3,00,50,000 | $ 31,50,000 | $ 2,69,00,000 |
| 2023 | $ 2,69,00,000 | $ 31,50,000 | $ 2,37,50,000 |
| 2024 | $ 2,37,50,000 | $ 31,50,000 | $ 2,06,00,000 |
| 2025 | $ 2,06,00,000 | $ 31,50,000 | $ 1,74,50,000 |
| 2026 | $ 1,74,50,000 | $ 31,50,000 | $ 1,43,00,000 |
| 2027 | $ 1,43,00,000 | $ 31,50,000 | $ 1,11,50,000 |
| 2028 | $ 1,11,50,000 | $ 31,50,000 | $ 80,00,000 |
Note 2
| Particulars | Amount |
| WDV as at 12/31/2020 | $ 3,32,00,000 |
| Less: Salvage value | $ 80,00,000 |
| Balance Depreciable amount (A) | $ 2,52,00,000 |
| Life of the asset (B) | $ 8 |
| Depreciation per year as per Straight line ('C) - A/B | $ 31,50,000 |
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