(Change in Estimate—Depreciation) Gerald Englehart Industries changed from the double-declining-balance to the straight-line method in 2018 on all its equipment. There was no change in the assets’ salvage values or useful lives. Plant assets, acquired on January 2, 2015, had an original cost of $1,600,000, with a $100,000 salvage value and an 8-year estimateduseful life. Income before depreciation expense was $270,000 in 2017 and $300,000 in 2018.Instructions(a) Prepare the journal entry(ies) to record depreciation expense in 2018.(b) Starting with income before depreciation expense, prepare the remaining portion of the income statement for 2017 and 2018.
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.
(Change in Estimate—
useful life. Income before depreciation expense was $270,000 in 2017 and $300,000 in 2018.
Instructions
(a) Prepare the
(b) Starting with income before depreciation expense, prepare the remaining portion of the income statement for 2017 and 2018.
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