Question

Problem 22-1

Holtzman Company is in the process of preparing its financial statements for 2014. Assume that no entries for depreciation have been recorded in 2014. The following information related to depreciation of fixed assets is provided to you.

1.		Holtzman purchased equipment on January 2, 2011, for $77,100. At that time, the equipment had an estimated useful life of 10 years with a $4,100 salvage value. The equipment is depreciated on a straight-line basis. On January 2, 2014, as a result of additional information, the company determined that the equipment has a remaining useful life of 4 years with a $2,800 salvage value.
2.		During 2014, Holtzman changed from the double-declining-balance method for its building to the straight-line method. The building originally cost $600,000. It had a useful life of 10 years and a salvage value of $21,000. The following computations present depreciation on both bases for 2012 and 2013.

		2013		2012
Straight-line		$57,900		$57,900
Declining-balance		96,000		120,000

3.

Holtzman purchased a machine on July 1, 2012, at a cost of $120,000. The machine has a salvage value of $20,000 and a useful life of 8 years. Holtzman’s bookkeeper recorded straight-line depreciation in 2012 and 2013 but failed to consider the salvage value.

A)Prepare the journal entries to record depreciation expense for 2014 and correct any errors made to date related to the information provided. (Ignore taxes.) (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 0 for the amounts.)

B) Show comparative net income for 2013 and 2014. Income before depreciation expense was $260,185 in 2014, and was $315,958 in 2013. (Ignore taxes.)

Answer 1

) Journal Eies No Auout itle and explanation Debit cred uei penses 13/00 Aceumulated Deprecia tion 131o0 2898 12 epieciabon Expenses pepeeiabon Acemulated $28982 ISOD Accurulated ธ 2,500 bion) Accumulated pepecia bier maere 3250 nasa KaSD Releinod earin -on

Cost ae 刁ZOOO Repicabn to 20y 20l1 to to До13 l o 300 21900 1g00 Lem (New salvage valu, Remaining usefl lafe ys 3LOO 652400111 yea»)

a6o, 1&S aben 2013 76000 took value on Jan 2oy 串441RS Les: Saage vale cpo on cass Re 2898.2 3) petica b0n tolaen hak Shoutd be take. 62So 5DDD 2 3DO 3aSD

2013 Corne befne demeli ation 96018s experse Nek Tocome 901I | 3100 quipment 7300 キ jaSDD 28498 12 fal