ABC, Incorporated constructed equipment at a total cost of $1,000,000. Construction was completed at the end of 2023 and the equipment was placed in service at the beginning of 2024. The equipment was being depreciated over a 10-year life using the sum-of-the-years'-digits method. The residual value is expected to be $50,000. At the beginning of 2027, ABC decided to change to the straight-line method. Equipment cost Equipment useful life Residual value $1,000,000 10 $50,000 Depreciation Expense Year SYD method Straight-line method 1 2 3 Totals Ignoring income taxes, prepare the journal entry relating to the machine for 2027. General Journal Debit Date December 31, 2027 Depreciation expense Accumulated depreciation Credit 0
ABC, Incorporated constructed equipment at a total cost of $1,000,000. Construction was completed at the end of 2023 and the equipment was placed in service at the beginning of 2024. The equipment was being depreciated over a 10-year life using the sum-of-the-years'-digits method. The residual value is expected to be $50,000. At the beginning of 2027, ABC decided to change to the straight-line method. Equipment cost Equipment useful life Residual value $1,000,000 10 $50,000 Depreciation Expense Year SYD method Straight-line method 1 2 3 Totals Ignoring income taxes, prepare the journal entry relating to the machine for 2027. General Journal Debit Date December 31, 2027 Depreciation expense Accumulated depreciation Credit 0
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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.
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Transcribed Image Text:ABC, Incorporated constructed equipment at a total cost of $1,000,000. Construction was completed at the end of 2023 and the
equipment was placed in service at the beginning of 2024. The equipment was being depreciated over a 10-year life using the
sum-of-the-years'-digits method. The residual value is expected to be $50,000. At the beginning of 2027, ABC decided to change to
the straight-line method.
Equipment cost
Equipment useful life
Residual value
$1,000,000
10
$50,000
Depreciation Expense
Year
SYD method
Straight-line method
1
2
3
Totals
Ignoring income taxes, prepare the journal entry relating to the machine for 2027.
Date
December 31, 2027 Depreciation expense
General Journal
Accumulated depreciation
Debit
Credit
0
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