On January 1, 2014, Pronghorn Company purchased a building and equipment that have the following useful lives, salvage values, and costs. Building, 40-year estimated useful life, $46,800 salvage value, $762,400 cost Equipment, 12-year estimated useful life, $10,000 salvage value, $101,800 cost The building has been depreciated under the double-declining-balance method through 2017. In 2018, the company decided to switch to the straight-line method of depreciation. Pronghorn also decided to change the total useful life of the equipment to 9 years, with a salvage value of $4,800 at the end of that time. The equipment is depreciated using the straight-line method. (a) Prepare the journal entry necessary to record the depreciation expense on the building in 2018. (b) Compute depreciation expense on the equipment for 2018.
On January 1, 2014, Pronghorn Company purchased a building and equipment that have the following useful lives, salvage values, and costs. Building, 40-year estimated useful life, $46,800 salvage value, $762,400 cost Equipment, 12-year estimated useful life, $10,000 salvage value, $101,800 cost The building has been depreciated under the double-declining-balance method through 2017. In 2018, the company decided to switch to the straight-line method of depreciation. Pronghorn also decided to change the total useful life of the equipment to 9 years, with a salvage value of $4,800 at the end of that time. The equipment is depreciated using the straight-line method. (a) Prepare the journal entry necessary to record the depreciation expense on the building in 2018. (b) Compute depreciation expense on the equipment for 2018.
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:On January 1, 2014, Pronghorn Company
purchased a building and equipment that
have the following useful lives, salvage
values, and costs.
Building, 40-year estimated useful
life, $46,800 salvage value, $762,400
cost
Equipment, 12-year estimated useful
life, $10,000 salvage value, $101,800
cost
The building has been depreciated under
the double-declining-balance method
through 2017. In 2018, the company
decided to switch to the straight-line
method of depreciation. Pronghorn also
decided to change the total useful life of
the equipment to 9 years, with a salvage
value of $4,800 at the end of that time. The
equipment is depreciated using the
straight-line method.
(a) Prepare the journal entry necessary to
record the depreciation expense on the
building in 2018.
(b) Compute depreciation expense on the
equipment for 2018.
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