1. 2 3. Equipment A was purchased January 2, 2017. It originally cost $541,000 and, for depreciation purposes, the straight-line method was originally chosen. The asset was originally expected to be useful for 10 years and have a zero salvage value. In 2020, the decision was made to change the depreciation method from straight-line to sum-of-the-years-digits, and the estimates relating to useful life and salvage value remained unchanged. 2. Equipment B was purchased January 3, 2016. It originally cost $184,500 and, for depreciation purposes, the straight-line method was chosen. The asset was originally expected to be useful for 15 years and have a zero residual value. In 2020, the decision was made to shorten the total life of this asset to 9 years and to estimate the residual value at $3,100. Additional data: 3. Equipment C was purchased January 5, 2016. The asset's original cost was $158,500, and this amount was entirely expensed in 2016. This particular asset has a 10-year useful life and no residual value. The straight-line method was chosen for depreciation purposes. 1. Income in 2020 before depreciation expense amounted to $397,900. Depreciation expense on assets other than A, B, and C totaled $54,800 in 2020. Income in 2019 was reported at $366,400.
1. 2 3. Equipment A was purchased January 2, 2017. It originally cost $541,000 and, for depreciation purposes, the straight-line method was originally chosen. The asset was originally expected to be useful for 10 years and have a zero salvage value. In 2020, the decision was made to change the depreciation method from straight-line to sum-of-the-years-digits, and the estimates relating to useful life and salvage value remained unchanged. 2. Equipment B was purchased January 3, 2016. It originally cost $184,500 and, for depreciation purposes, the straight-line method was chosen. The asset was originally expected to be useful for 15 years and have a zero residual value. In 2020, the decision was made to shorten the total life of this asset to 9 years and to estimate the residual value at $3,100. Additional data: 3. Equipment C was purchased January 5, 2016. The asset's original cost was $158,500, and this amount was entirely expensed in 2016. This particular asset has a 10-year useful life and no residual value. The straight-line method was chosen for depreciation purposes. 1. Income in 2020 before depreciation expense amounted to $397,900. Depreciation expense on assets other than A, B, and C totaled $54,800 in 2020. Income in 2019 was reported at $366,400.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
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.
Topic Video
Question
Pp.6.
Subject :- account
Transcribed Image Text:(b)
Prepare comparative retained earnings statements for Larkspur Inc. for 2019 and 2020. The company had retained earnings of
$198,000 at December 31, 2018.
Your answer is partially correct.
Retained Earnings, January 1, as reported
Add
Add
Retained Earnings, January 1, as adjusted
Error in Record
Retained Earnings, December 31
List of Accounts
Net Income (Loss)
eTextbook and Media
Save for Later
LARKSPUR INC.
Comparative Retained Earnings Statements
For the Years Ended
Equipment
2020
627730
382050
1009780
20
Attempts: 1 of 5 used Submit Answer
Transcribed Image Text:Current Attempt in Progress
On December 31, 2020, before the books were closed, the management and accountants of Larkspur Inc. made the following
determinations about three pieces of equipment.
1.
2.
3.
2.
Additional data:
3.
1. Income in 2020 before depreciation expense amounted to $397,900.
Depreciation expense on assets other than A, B, and C totaled $54,800 in 2020.
Income in 2019 was reported at $366,400.
Ignore all income tax effects.
100,100 shares of common stock were outstanding in 2019 and 2020.
4.
5.
(a)
Equipment A was purchased January 2, 2017. It originally cost $541,000 and, for depreciation purposes, the straight-line
method was originally chosen. The asset was originally expected to be useful for 10 years and have a zero salvage value. In
2020, the decision was made to change the depreciation method from straight-line to sum-of-the-years-digits, and the
estimates relating to useful life and salvage value remained unchanged.
Equipment B was purchased January 3, 2016. It originally cost $184,500 and, for depreciation purposes, the straight-line
method was chosen. The asset was originally expected to be useful for 15 years and have a zero residual value. In 2020, the
decision was made to shorten the total life of this asset to 9 years and to estimate the residual value at $3,100.
1.
Equipment C was purchased January 5, 2016. The asset's original cost was $158,500, and this amount was entirely expensed
in 2016. This particular asset has a 10-year useful life and no residual value. The straight-line method was chosen for
depreciation purposes.
2.
Prepare all necessary entries in 2020 to record these determinations. (Credit account titles are automatically indented when amount
is entered. Do not indent manually. If no entry is required, select "No Entry for the account titles and enter O for the amounts)
3.
No. Account Titles and Explanation
Your answer is correct.
Depreciation Expense
Accumulated Depreciation-Equipment
Depreciation Expense
Accumulated Depreciation-Equipment
Equipment
Accumulated Depreciation-Equipment
Retained Earnings
(To correct equipment expensed.)
Depreciation Expense
Accumulated Depreciation-Equipment
(To record depreciation.)
eTextbook and Media
List of Accounts
Debit
94675
26440
158500
15850
Credit
94675
26440
63400
95100
15850
Attempts: 2 of 5 used
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