First, Drew company changed the total useful life from 10 years to 3 years on an asset purchased January 1, 2017, for $150,000. The asset was originally expected to be sold for $50,000 at the end of its useful life, but that amount also was changed in 2020 to $100,000. Drew company applies the straight-line method of depreciation to this asset.
Second, Drew company changed from FIFO to LIFO but is unable to recreate LIFO inventory layers. The FIFO 2020 beginning and ending inventories are $30,000 and $45,000, respectively. Drew company expects LIFO to render income numbers more useful for prediction. Third, Drew company changed to the straight-line method from the sum-of-years’-digits method on equipment purchased for $650,000 on January 1, 2016. The equipment has a $100,000 residual value and 10-year useful life. These values were not changed. The change in depreciation method was made to provide a better measure of expired equipment cost because the annual benefits derived from the asset have been relatively constant. Fourth, an error in amortizing patents was discovered in 2020. Patents costing $510,000 on January 1, 2018, were amortized over their legal life (20 years). The accountant neglected to obtain an estimate of the patent’s economic life, which totals only 5 years. The entire cost of the patents was deducted for tax purposes when acquired.
Record the entries in 2020 necessary to make the accounting changes. Assume a tax rate of 30%.
In the question it is said that tax @30%
I n case of accounting estimate change will lead to
Saparate disclosure in that expense increased tax amount of applicable portion will decrease.
First, Drew company changed the total useful life from 10 years to 3 years on an...
Oliver Inc. acquired the following assets in January 2017: Equipment: estimated useful life, 5 years; residual value, $15,000 $470,000 Building: estimated useful life, 30 years; no residual value $720,000 The equipment was depreciated using the double-declining-balance method for the first three years for financial reporting purposes. In 2020, the company decided to change the method of calculating depreciation for the equipment to the straight-line method, because of a change in the pattern of benefits received (but no change was made...
Broadway Ltd. purchased equipment on January 1, 2019, for $900,000, estimating a six-year useful life and no residual value. In 2019 and 2020, Broadway depreciated the asset using the straight-line method. In 2021, Broadway changed to sum-of-years'-digits depreciation for this equipment. What depreciation would Broadway record for the year 2021 on this equipment? (Do not round your depreciation rate.) Multiple Choice $150,000. $120,000. $240,000. $300,000.
On January 1, 2016, Walid Company purchases equipment for $12,000 with 4 years estimated useful life and no salvage value. On January 1, 2019, Walid Company retires the equipment. The straight-line method of depreciation is applied and financial statements are prepared yearly. The retirement entry is: * On January 1, 2018, Zak Company purchases equipment for $24,000, with an estimated useful life of 4 years and no salvage value. The straight-line depreciation method is applied and financial statements are prepared...
Rhonda Company purchased equipment on January 1, Year 1, for $420,000, estimating a four-year useful life and no residual value. In Year 1 and 2, Rhonda depreciated the asset using the sum-of-years'-digits method and the book value at the end of Year 2 was $126,000. At the beginning of Year 3, Rhonda changed to straight-line depreciation for this equipment. What depreciation would Rhonda record for the Year 3 on this equipment? (Round your answer to the nearest whole dollar.)
On January 4, 2019, Columbus Company purchased new equipment for $693,000 that had a useful life of four years and a salvage value of $53,000. Required: Prepare a schedule showing the annual depreciation and end-of-year accumulated depreciation for the first three years of the asset’s life under the straight-line method, the sum-of-the-years’-digits method, and the double-declining-balance method. Analyze: If the double-declining balance method is used to compute depreciation, what would be the book value of the asset at the end...
Broadway Ltd. purchased equipment on January 1, 2016, for $600,000, estimating a 6-year useful life and no residual value. In 2016 and 2017, Broadway depreciated the asset using the straight-line method. In 2018, Broadway changed to sum-of-years'-digits depreciation for this equipment. What depreciation would Broadway record for the year 2018 on this equipment? (Do not round your depreciation rate.)
Whitney Company purchased equipment on January 1, 2020, for $144,000. This equipment has a useful life of ten years and a residual value of $8,000. The company uses the straight-line depreciation method. In 2021, the company discovered that it had incorrectly recorded depreciation for 2020 as $9,280. Ignoring income taxes, record the correcting entry on January 1, 2021. Date Account Name Dr. Cr. Jan. 1, 2021 Answer Answer Answer Answer Answer Answer
On July 1, 2020, Swifty Company purchased for $6,120,000 snow-making equipment having an estimated useful life of 5 years with an estimated salvage value of $255,000. Depreciation is taken for the portion of the year the asset is used. Complete the form below by determining the depreciation expense and year-end book values for 2020 and 2021 using the 1. sum-of-the-years'-digits method. 2. double-declining balance method. 2020 2021 Sum-of-the-Years'-Digits Method Equipment Less: Accumulated Depreciation $6,120,000 $6,120,000 Year-End Book Value $6,120,000 $6,120,000...
On July 1, 2020, Martinez Company purchased for $4,680,000 snow-making equipment having an estimated useful life of 5 years with an estimated salvage value of $195,000. Depreciation is taken for the portion of the year the asset is used Complete the form below by determining the depreciation expense and year-end book values for 2020 and 2021 using the 1. sum-of-the-years'-digits method 2. double-declining balance method 2020 2021 Sum-of-the-Years'-Digits Method Equipment $4,680,000 $4,680,000 Less: Accumulated Depreciation Year-End Book Value Depreciation Expense...
Holtzman Company is in the process of preparing its financial statements for 2020. Assume that no entries for depreciation have been recorded in 2020. The following information related to depreciation of fixed assets is provided to you. 1. Holtzman purchased equipment on January 2, 2017, for $105,400. At that time, the equipment had an estimated useful life of 10 years with a $6,200 residual value. The equipment is depreciated on a straight-line basis. On January 2, 2020, as a result...