On January 1, 2022, Sheffield Company purchased a building and equipment that have the following useful lives, salvage values, and costs. Building, 40-year estimated useful life, $52,800 salvage value, $724,000 cost Equipment, 12-year estimated useful life, $10,800 salvage value, $91,800 cost The building has been depreciated under the double-declining-balance method through 2025. In 2026, the company decided to switch to the straight-line method of depreciation. Sheffield 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 2026. (Round answers to 0 decimal places, eg. 125. Credit account titles are automatically indented when the 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. List debit entry before credit entry)
On January 1, 2022, Sheffield Company purchased a building and equipment that have the following useful lives, salvage values, and costs. Building, 40-year estimated useful life, $52,800 salvage value, $724,000 cost Equipment, 12-year estimated useful life, $10,800 salvage value, $91,800 cost The building has been depreciated under the double-declining-balance method through 2025. In 2026, the company decided to switch to the straight-line method of depreciation. Sheffield 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 2026. (Round answers to 0 decimal places, eg. 125. Credit account titles are automatically indented when the 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. List debit entry before credit entry)
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:On January 1, 2022, Sheffield Company purchased a building and equipment that have the following useful lives, salvage values, and
costs.
Building, 40-year estimated useful life, $52,800 salvage value, $724,000 cost
Equipment, 12-year estimated useful life, $10,800 salvage value, $91,800 cost
The building has been depreciated under the double-declining-balance method through 2025. In 2026, the company decided to switch
to the straight-line method of depreciation. Sheffield 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 2026. (Round answers to O decimal
places, eg. 125. Credit account titles are automatically indented when the 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. List debit entry before credit entry.)
Account Titles and Explanation
Debit
(a)
Bramble Industries changed from the double-declining-balance to the straight-line method in 2026 on all its equipment. There was no
change in the assets' salvage values or useful lives. Plant assets, acquired on January 2, 2023, had an original cost of $1.561,600, with
a $112,000 salvage value and an 8-year estimated useful life. Income before depreciation expense was $255,200 in 2025 and
$320,000 in 2026.
Credit
Prepare the journal entry to record depreciation expense in 2026. (Credit account titles are automatically indented when the 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. List debit
entry before credit entry)
Account Titles and Explanation
Debit
Credit
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