Question

Crane Enterprises Ltd. purchased machinery on January 1, 2015. The machinery cost $399,000, and was estimated to have a ten-year useful life and a residual value of $44,000. Straight-line depreciation was recorded each year-end (December 31) to the end of December 31, 2019. On January 1, 2020, Crane re-evaluated the machinery. It was now believed that the equipment's total life was expected to be 15 years. Prepare the journal entry to record depreciation for 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 O for the amounts.) Account Titles and Explanation Debit Credit

Answer 1

Annual depreciation before re-evlauation ($399,000-$44,000)/10 Annual depreciation before re-evlauation $355,000/10 Annual depreciation before re-evlauation $35,500 Accumulated depreciation at the end of Dec 31, 2019 $35,500*5 years Accumulated depreciation at the end of Dec 31, 2019 $177,500 Book value at the end of Dec 31, 2019 $399,000-$177,500 Book value at the end of Dec 31, 2019 $221,500 Remaining useful life after re-evaluating 15 years-5years 10 years Depreciation expense for 2020 ($221,500-$44,000)/10 Depreciation expense for 2020 $177,500/10 Depreciation expense for 2020 $17,750 Account Titles and Explanation Debit Credit Depreciation expense $17,750 $17,750 Accumulated Depreciation - Machine (To record the depreciation expense)