Answered: Following an internal audit of Adam…

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 5MC: During 2019, White Company determined that machinery previously depreciated over a 7-year life had a...

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Following an internal audit of Adam Limited, a manufacturing company for the year 2023, the following items were brought to the attention of the Accountant. The Accountant is unsure how to proceed. She has hired you as a consultant to assist her.
1.
Adam Company changed depreciation methods in 2023 from double-declining-balance to straight-line. The accumulated depreciation prior to 2023 under double-declining-balance was $90,000, whereas the straight-line accumulated depreciation prior to 2023 would have been $50,000. Adam’s depreciable assets had a cost of $250,000, with a $40,000 residual value and an 8-year remaining useful life at the beginning of 2023.
Requirements:
Discuss the appropriate accounting treatment for the above and prepare the 2023 journal entry related to the depreciable assets , if necessary. Ignore income tax effects

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Section 179 Deduction and Modified Accelerated Cost Recovery System (MACRS) Depreciation

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