Holt Developments Ltd. put an asset in service on January 1, 2018. Its cost was $252,000, its predicted service life was six years, and its expected residual value was $25,200. The company decided to use double-declining balance depreciation. After consulting with the company's auditors, management decided to change to straight line depreciation in 2020, without changing either the original service life or residual value. Required: a. What is depreciation expense for 2020? Answer is complete but not entirely correct. Depreciation expense $ 21,700 b. Calculate the effect of this change on retained earnings. Retained carings will Answer is not complete. → increase by
Holt Developments Ltd. put an asset in service on January 1, 2018. Its cost was $252,000, its predicted service life was six years, and its expected residual value was $25,200. The company decided to use double-declining balance depreciation. After consulting with the company's auditors, management decided to change to straight line depreciation in 2020, without changing either the original service life or residual value. Required: a. What is depreciation expense for 2020? Answer is complete but not entirely correct. Depreciation expense $ 21,700 b. Calculate the effect of this change on retained earnings. Retained carings will Answer is not complete. → increase by
Chapter1: Financial Statements And Business Decisions
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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:Holt Developments Ltd. put an asset in service on January 1, 2018. Its cost was $252,000, its predicted service life was six years, and
Its expected residual value was $25,200. The company decided to use double-declining-balance depreciation. After consulting with
the company's auditors, management decided to change to straight line depreciation in 2020, without changing either the original
service life or residual value.
Required:
a. What is depreciation expense for 2020?
Answer is complete but not entirely correct.
Depreciation
expense
$ 21,700-
b. Calculate the effect of this change on retained earnings
Retained earnings
will
Answer is not complete.
increase by
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