25-3) Colorado Company has been using the sum-of-the-years'-digits depreciation method to depreciate some office equipment that was acquired at the beginning of 2019. At the beginning of 2021, Colorado Consulting decided to change to the straight-line method. The equipment cost $120,000 and is expected to have no salvage value. The estimated useful life of the equipment is five years. Ignore income taxes. Required: Prepare the journal entry to record depreciation for 2021.
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.
On April 1, 2021, Metro Co. purchased machinery at a cost of $42,000. The machinery is expected to last 10 years and to have a residual value of $6,000.
Required:
Compute
Please complete 25-3 only
25-2) On January 1, 2016, Denver Company bought a machine for $60,000. It was then estimated that the useful life of the machine would be eight years with a salvage value of $8,000. On January 1, 2020, it was decided that the machine's total life from acquisition date should have been only six years with a residual value of only $2,000. The company used straight-line depreciation.
Required:
Compute depreciation expense for 2020 (1/1/20 ~ 12/31/20).
25-3) Colorado Company has been using the sum-of-the-years'-digits depreciation method to depreciate some office equipment that was acquired at the beginning of 2019. At the beginning of 2021, Colorado Consulting decided to change to the straight-line method. The equipment cost $120,000 and is expected to have no salvage value. The estimated useful life of the equipment is five years. Ignore income taxes.
Required:
Prepare the
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