The Canliss Milling Company purchased machinery on January 2, 2014, for $800,000. A five-year life was estimated and no residual value was anticipated. Canliss decided to use the straight-line depreciation method and recorded $160,000 in depreciation in 2014 and 2015. Early in 2016, the company changed its depreciation method to the sum-of-the-years’-digits (SYD) method. Required: 1. Briefly describe the way Canliss should report this accounting change in the 2015–2016 comparative financial statements. 2. Prepare any 2016 journal entry related to the change.

Question
Asked Jan 23, 2020
21 views

The Canliss Milling Company purchased machinery on January 2, 2014, for $800,000. A five-year life was estimated and no residual value was anticipated. Canliss decided to use the straight-line depreciation method and recorded $160,000 in depreciation in 2014 and 2015. Early in 2016, the company changed its depreciation method to the sum-of-the-years’-digits (SYD) method. Required: 1. Briefly describe the way Canliss should report this accounting change in the 2015–2016 comparative financial statements. 2. Prepare any 2016 journal entry related to the change.

check_circle

Expert Answer

Step 1

Requirement 1:

 

The accounting changes in comparative financial statements:

 

The depreciation changes are the result of the changes in the accounting principles. The changes in the depreciation methods reflect the following:

 

  • Estimated future benefit from the asset.
  • The pattern of receiving the benefits.
  • The awareness of the company regarding such benefits.

 

Canliss Milling Company does not change its previous financial statement and has not revised; instead, they simply changed the method of depreciation early in 2018 by implementing the Straight line depreciation method.

 

The un-depreciated cost remaining at the time of the change would be depreciated by the straight-line method of depreciation over the remaining useful life.

 

The disclosure note should explain the changes in depreciation and effect of the change in the financial statement. In addition, the nature and justification to the change should be explained.

Step 2

Requirement 2:

 

Calculate the cost to be depreciated over the remaining life of 3 years.

Accounting homework question answer, step 2, image 1
fullscreen
Step 3

Working Notes:

...
Accounting homework question answer, step 3, image 1
fullscreen

Want to see the full answer?

See Solution

Check out a sample Q&A here.

Want to see this answer and more?

Solutions are written by subject experts who are available 24/7. Questions are typically answered within 1 hour.*

See Solution
*Response times may vary by subject and question.
Tagged in

Business

Accounting

Financial Accounting

Related Accounting Q&A

Find answers to questions asked by student like you
Show more Q&A
add
question_answer

Q: At the end of 2015, Majors Furniture Company failed to accrue $61,000 of interest expense that accru...

A: Click to see the answer

question_answer

Q: Port Ormond Carpet Company manufactures carpets. Fiber is placed in process in the Spinning Departme...

A: Journal Entries

question_answer

Q: a. Based on the data in Exercise 20-11 (attached), determine the following:1. Cost of beginning work...

A: The statement of equivalent production units (EPUs) shows the equivalent units of production for mat...

question_answer

Q: During 2016, the Nicklaus Corporation participated in three treasury stock transactions: a. On June ...

A: When a compnay buys back its own shares, they are called treasury stock.

question_answer

Q: What is meant by a dilutive security?

A: Dilutive security is a type of investment security that helps the company increase its equity portio...

question_answer

Q: When the amount paid for land is 36,000 and the amount paid expenses is 10,000 the balance in total ...

A: Assets: These are the resources owned and controlled by business and used to produce benefits for th...

question_answer

Q: The November 2019 payroll of Walnut Company is $17,500,000, of which $2,150,000 is exempt from Socia...

A: Prepare the journal entries to record payroll expense.

question_answer

Q: You are the new controller for Engineered Solutions. The company treasurer, Randy Patey, believes th...

A: Income Tax Expenses: The expenses which are related to the taxable income of the individuals and bus...

question_answer

Q: At January 1, 2016, Brainard Industries, Inc., owed Second BancCorp $12 million under a 10% note due...

A: Click to see the answer