On January 1, 2018, Kefauver Company purchased a piece of equipment for $375,000. The equipment had a useful life of 10 years and a residual value of $10,000. The company initially starts recording depreciation on a straight-line method. The following independent situations occur at the beginning of 2020: a. The life of the equipment was originally estimated to be 10 years but due to the wear and tear on the machine they changed it to a remaining life of 7 years. b. It was discovered that when initially recorded on the books the residual value had been ignored. Required: Prepare all journal entries related to the equipment for 2020 for each of the independent situations, ignoring income taxes.
On January 1, 2018, Kefauver Company purchased a piece of equipment for $375,000. The equipment had a useful life of 10 years and a residual value of $10,000. The company initially starts recording depreciation on a straight-line method. The following independent situations occur at the beginning of 2020: a. The life of the equipment was originally estimated to be 10 years but due to the wear and tear on the machine they changed it to a remaining life of 7 years. b. It was discovered that when initially recorded on the books the residual value had been ignored. Required: Prepare all journal entries related to the equipment for 2020 for each of the independent situations, ignoring income taxes.
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 11E: On January 1, 2014, Klinefelter Company purchased a building for 520,000. The building had an...
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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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On January 1, 2018, Kefauver Company purchased a piece of equipment for $375,000. The equipment had a useful life of 10 years and a residual value of $10,000. The company initially starts recording depreciation on a straight-line method. The following independent situations occur at the beginning of 2020:
| a. | The life of the equipment was originally estimated to be 10 years but due to the wear and tear on the machine they changed it to a remaining life of 7 years. |
| b. | It was discovered that when initially recorded on the books the residual value had been ignored. |
Required:
| Prepare all |
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