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At the beginning of 2020, Holden Company’s controller asked you to prepare correcting entries for the following three situations: 1. Machine X was purchased for $100,000 on January 1, 2015. Straight-line depreciation has been recorded for 5 years, and the Accumulated Depreciation account has a balance of $45,000. The estimated residual value remains at $10,000, but the service life is now estimated to be 1 year longer than originally estimated. 2. Machine Y was purchased for $40,000 on January 1, 2018. It had an estimated residual value of $4,000 and an estimated service life of 8 years. It has been depreciated under the sum-of-the-years’-digits method for 2 years. Now, the company has decided to change to the straight-line method. 3. Machine Z was purchased for $80,000 on January 1, 2019. Double-declining-balance depreciation has been recorded for 1 year. The estimated residual value is $8,000 and the estimated service life is 5 years. The computation of the depreciation erroneously included the estimated residual value. Required: Prepare any necessary correcting journal entries for each situation. Also prepare the journal entry for each situation to record the depreciation for 2020. Ignore income taxes.

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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
Publisher: Cengage Learning
ISBN: 9781337788281
BuyFind

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
Publisher: Cengage Learning
ISBN: 9781337788281

Solutions

Chapter
Section
Chapter 22, Problem 8P
Textbook Problem

At the beginning of 2020, Holden Company’s controller asked you to prepare correcting entries for the following three situations:

  1. 1. Machine X was purchased for $100,000 on January 1, 2015. Straight-line depreciation has been recorded for 5 years, and the Accumulated Depreciation account has a balance of $45,000. The estimated residual value remains at $10,000, but the service life is now estimated to be 1 year longer than originally estimated.
  2. 2. Machine Y was purchased for $40,000 on January 1, 2018. It had an estimated residual value of $4,000 and an estimated service life of 8 years. It has been depreciated under the sum-of-the-years’-digits method for 2 years. Now, the company has decided to change to the straight-line method.
  3. 3. Machine Z was purchased for $80,000 on January 1, 2019. Double-declining-balance depreciation has been recorded for 1 year. The estimated residual value is $8,000 and the estimated service life is 5 years. The computation of the depreciation erroneously included the estimated residual value.

Required:

Prepare any necessary correcting journal entries for each situation. Also prepare the journal entry for each situation to record the depreciation for 2020. Ignore income taxes.

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Chapter 22 Solutions

Intermediate Accounting: Reporting And Analysis
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