A Company purchased a piece of machinery for $60,000 on January 1, 2019 and has been depreciating the machine using the double-declining-balance method based on a five-year estimated useful life and $10,000 salvage value. On January 1, 2021, A Company decided to switch to the straight-line method of depreciation. The salvage value is still $10,000 and the estimated useful life did not change. Ignore income taxes. Required: (show the computing process and precise journal entries) (1) Prepare the appropriate journal entry, if any, to record the accounting change. (2) 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.
A Company purchased a piece of machinery for $60,000 on January 1, 2019 and has been
Required: (show the computing process and precise journal entries)
(1) Prepare the appropriate
(2) Prepare the journal entry to record depreciation for 2021.
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