Intermediate Accounting
9th Edition
ISBN: 9781259722660
Author: J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher: McGraw-Hill Education
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Chapter 20, Problem 20.6P
Change in principle; change in
• LO20–3
During 2016 and 2017, Faulkner Manufacturing used the sum-of-the-years’-digits (SYD) method of depreciation for its depreciable assets, for both financial reporting and tax purposes. At the beginning of 2018, Faulkner decided to change to the straight-line method for both financial reporting and tax purposes. A tax rate of 40% is in effect for all years.
For an asset that cost $21,000 with an estimated residual value of $1,000 and an estimated useful life of 10 years, the depreciation under different methods is as follows:
Required:
1. Describe the way Faulkner should account for the change described. Include in your answer any
2. Suppose instead that Faulkner previously used straight-line depreciation and changed to sum-of-the-years’-digits in 2018. Describe the way Faulkner should account for the change. Include in your answer any journal entry Faulkner will record in 2018 related to the change and any required note disclosures.
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Problem 8-18Section 1231 Gains and Losses, Depreciation Recapture (LO 8.7, 8.8)
William sold Section 1245 property for $28,000 in 2021. The property cost $41,000 when it was purchased 5 years ago. The depreciation claimed on the property was $20,000.
If an amount is zero, enter "0".
Question Content Area
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Chapter 20 Solutions
Intermediate Accounting
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