Coronado Company is in the process of preparing its financial statements for 2022. Assume that no entries for depreciation have been recorded in 2022. The following information related to depreciation of fixed assets is provided to you. Coronado purchased equipment on January 2, 2019, for $86,300. At that time, the equipment had an estimated useful life of 10 years with a $5,300 residual value. The equipment is depreciated on a straight-line basis. On January 2, 2022, as a result of additional information, the company determined that the equipment has a remaining useful life of 4 years with a $2,800 1. residual value. 2. During 2022, Coronado changed from the double-declining-balance method for its building to the straight-line method. The building originally cost $300,000. It had a useful life of 10 years and a residual value of $30,000. The following computations present depreciation on both bases for 2020 and 2021. 2021 2020 Straight-line $27,000 $27,000 Declining-balance 48,000 60,000 Coronado purchased a machine on July 1, 2020, at a cost of $120,000. The machine has a residual value of $20,000 and a useful life of 8 years. Coronado's bookkeeper recorded straight-line depreciation in 2020 and 2021 but failed to consider the 3. residual value.
Coronado Company is in the process of preparing its financial statements for 2022. Assume that no entries for depreciation have been recorded in 2022. The following information related to depreciation of fixed assets is provided to you. Coronado purchased equipment on January 2, 2019, for $86,300. At that time, the equipment had an estimated useful life of 10 years with a $5,300 residual value. The equipment is depreciated on a straight-line basis. On January 2, 2022, as a result of additional information, the company determined that the equipment has a remaining useful life of 4 years with a $2,800 1. residual value. 2. During 2022, Coronado changed from the double-declining-balance method for its building to the straight-line method. The building originally cost $300,000. It had a useful life of 10 years and a residual value of $30,000. The following computations present depreciation on both bases for 2020 and 2021. 2021 2020 Straight-line $27,000 $27,000 Declining-balance 48,000 60,000 Coronado purchased a machine on July 1, 2020, at a cost of $120,000. The machine has a residual value of $20,000 and a useful life of 8 years. Coronado's bookkeeper recorded straight-line depreciation in 2020 and 2021 but failed to consider the 3. residual value.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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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:Coronado Company is in the process of preparing its financial statements for 2022. Assume that no entries for depreciation have been
recorded in 2022. The following information related to depreciation of fixed assets is provided to you.
Coronado purchased equipment on January 2, 2019, for $86,300. At that time, the equipment had an estimated useful life of
10 years with a $5,300 residual value. The equipment is depreciated on a straight-line basis. On January 2, 2022, as a result of
additional information, the company determined that the equipment has a remaining useful life of 4 years with a $2,800
1.
residual value.
2.
During 2022, Coronado changed from the double-declining-balance method for its building to the straight-line method. The
building originally cost $300,000. It had a useful life of 10 years and a residual value of $30,000. The following computations
present depreciation on both bases for 2020 and 2021.
2021
2020
Straight-line
$27,000
$27,000
Declining-balance
48,000
60,000
3.
Coronado purchased a machine on July 1, 2020, at a cost of $120,000. The machine has a residual value of $20,000 and a
useful life of 8 years. Coronado's bookkeeper recorded straight-line depreciation in 2020 and 2021 but failed to consider the
residual value.
Prepare the journal entries to record depreciation expense for 2022 and correct any errors made to date related to the
information provided. (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.)
No. Account Titles and Explanation
Debit
Credit
1.
2.
3.
(To record current year depreciation.)
(To correct prior year depreciation.)
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