(Supplement) Recording and Explaining Depreciation, Extraordinary Repairs, and Changes in Estimated Useful Life and Residual Value (Straight-Line Depreciation)
At the end of the annual accounting period, December 31, 2012, O’Connor Company’s records reflected the following for Machine A;
Cost when acquired | $30,000 |
Accumulated depreciation | 10,200 |
During January 2013, the machine was renovated at a cost of $15,500. As a result, the estimated life increased from five years to eight years, and the residual value increased from $4,500 to $6,500. The company uses straight-line depreciation.
Required:
1. Give the journal entry to record the renovation.
2. How old was the machine at the end of 2012?
3. Give the adjusting entry at the end of 2013 to record straight-line depreciation for the year.
4. Explain the rationale for your entries in requirements 1 and 3.
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