Company is in the process of preparing its financial statements for 2020. Assume that no entries for de reciation have been recorded in 2020. The following information related to depreciation of fixed assets provided to you. 1. Holtzman purchased equipment on January 2, 2017, for $85,000. At that time, the equipment had an estimated useful life of 10 years with a $5,000 salvage value. The equipment is depreciated on a straight-line basis. On January 2, 2020, as a result of additional information, the company deter- mined that the equipment has a remaining useful life of 4 years with a $3,000 salvage value. 2. During 2020, Holtzman changed from the double-declining-balance method for its building to the straight-line method. The building originally cost $300,000. It had a useful life of 10 years and a salvage value of $30,000. The following computations present depreciation on both bases for 2018 and 2019. Straight-line Declining-balance 2019 $27,000 48,000 2018 $27,000 60,000 3. Holtzman purchased a machine on July 1, 2018, at a cost of $120,000. The machine has a salvage value of $16,000 and a useful life of 8 years. Holtzman's bookkeeper recorded straight-line deprecia- tion in 2018 and 2019 but failed to consider the salvage value.
Company is in the process of preparing its financial statements for 2020. Assume that no entries for de reciation have been recorded in 2020. The following information related to depreciation of fixed assets provided to you. 1. Holtzman purchased equipment on January 2, 2017, for $85,000. At that time, the equipment had an estimated useful life of 10 years with a $5,000 salvage value. The equipment is depreciated on a straight-line basis. On January 2, 2020, as a result of additional information, the company deter- mined that the equipment has a remaining useful life of 4 years with a $3,000 salvage value. 2. During 2020, Holtzman changed from the double-declining-balance method for its building to the straight-line method. The building originally cost $300,000. It had a useful life of 10 years and a salvage value of $30,000. The following computations present depreciation on both bases for 2018 and 2019. Straight-line Declining-balance 2019 $27,000 48,000 2018 $27,000 60,000 3. Holtzman purchased a machine on July 1, 2018, at a cost of $120,000. The machine has a salvage value of $16,000 and a useful life of 8 years. Holtzman's bookkeeper recorded straight-line deprecia- tion in 2018 and 2019 but failed to consider the salvage value.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:US
P22.2 (LO 1, 2, 3) Excel Groupwork (Change in Estimate and Error Correction) Holtzman
Company is in the process of preparing its financial statements for 2020. Assume that no entries for de-
preciation 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 $85,000. At that time, the equipment had
an estimated useful life of 10 years with a $5,000 salvage value. The equipment is depreciated on
a straight-line basis. On January 2, 2020, as a result of additional information, the company deter-
mined that the equipment has a remaining useful life of 4 years with a $3,000 salvage value.
2. During 2020, Holtzman changed from the double-declining-balance method for its building to the
straight-line method. The building originally cost $300,000. It had a useful life of 10 years and a
salvage value of $30,000. The following computations present depreciation on both bases for 2018
and 2019.
Straight-line
Declining-balance
2019
$27,000
48,000
2018
$27,000
60,000
3. Holtzman purchased a machine on July 1, 2018, at a cost of $120,000. The machine has a salvage
value of $16,000 and a useful life of 8 years. Holtzman's bookkeeper recorded straight-line deprecia-
tion in 2018 and 2019 but failed to consider the salvage value.
Transcribed Image Text:Instructions
a. Prepare the journal entries to record depreciation expense for 2020 and correct any errors made to
date related to the information provided. (Ignore taxes.)
b. Show comparative net income for 2019 and 2020. Income before depreciation expense was $300,000
in 2020, and was $310,000 in 2019. (Ignore taxes.)
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