Bailand Company purchased a building for $218,000 that had an estimated residual value of $8,000 and an estimated service life of 10 years. Bailand purchased the building 4 years ago and has used straight-line depreciation. At the beginning of the fifth year (before it records depreciation expense for the year), the following independent situations occur: 1. Bailand estimates that the asset has 8 years’ life remaining (for a total of 12 years). 2. Bailand changes to the sum-of-the-years’-digits method. 3. Bailand discovers that the estimated residual value has been ignored in the computation of depreciation expense.
Bailand Company purchased a building for $218,000 that had an estimated residual value of $8,000 and an estimated service life of 10 years. Bailand purchased the building 4 years ago and has used straight-line depreciation. At the beginning of the fifth year (before it records depreciation expense for the year), the following independent situations occur: 1. Bailand estimates that the asset has 8 years’ life remaining (for a total of 12 years). 2. Bailand changes to the sum-of-the-years’-digits method. 3. Bailand discovers that the estimated residual value has been ignored in the computation of depreciation expense.
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter22: Accounting For Changes And Errors.
Section: Chapter Questions
Problem 8P: At the beginning of 2020, Holden Companys controller asked you to prepare correcting entries for the...
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Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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Bailand Company purchased a building for $218,000 that had an estimated residual value of $8,000 and an estimated service life of 10 years. Bailand purchased the building 4 years ago and has used straight-line depreciation . At the beginning of the fifth year (before it records depreciation expense for the year), the following independent situations occur:
| 1. | Bailand estimates that the asset has 8 years’ life remaining (for a total of 12 years). |
| 2. | Bailand changes to the sum-of-the-years’-digits method. |
| 3. | Bailand discovers that the estimated residual value has been ignored in the computation of depreciation expense. |
Transcribed Image Text:General Journal
Bailand estimates that the asset has 8 years' life remaining (for a total of 12 years). Prepare the joumal entry on December 31 to record depreciation in the fifth year after the change in estimate. Ignore income taxes. Additional Instruction
PAGE 16
GENERAL JOURNAL
DATE
ACCOUNT TITLE
POST. REF.
DEBIT
CREDIT
Prepare the jourmal entry on December 31 to record depreciation in the fifth year after the change in depreciation method. Additional Instruction
PAGE 16
GENERAL JOURNAL
DATE
ACCOUNT TITLE
POST. REF.
DEBIT
CREDIT
1
Prepare the jourmal entries on December 31 to record the prior period adjustment for the error and depreciation in the fifth year. Ignore income taxes. Additional Instruction
PAGE 16
GENERAL JOURNAL
DATE
ACCOUNT TITLE
POST, REF.
DEBIT
CREDIT
1
4
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