Pharoah Inc. acquired the following assets in January 2023. Equipment, estimated service life, 5 years; no salvage value Building, estimated service life, 40 years; salvage value, $567,000 The equipment has been depreciated using the double-declining balance method for the first 2 years for financial reporting purposes. In 2025, the company decided to change the method of computing depreciation to the straight-line method for the equipment, but no change was made in the estimated service life or salvage value. It was also decided to change the total estimated service life of the building from 40 years to 35 years, with no change in the estimated salvage value. The building is depreciated on the straight-line method. (a) (b) No. Account Titles and Explanation (a) (b) Prepare the general journal entry to record depreciation expense for the equipment in 2025. Prepare the journal entry to record depreciation expense for the building in 2025. Depreciation Expense Accumulated Depreciation-Equipment $621,000 $5,007,000 Depreciation Expense Accumulated Depreciation-Buildings Debit Credit 0000
Pharoah Inc. acquired the following assets in January 2023. Equipment, estimated service life, 5 years; no salvage value Building, estimated service life, 40 years; salvage value, $567,000 The equipment has been depreciated using the double-declining balance method for the first 2 years for financial reporting purposes. In 2025, the company decided to change the method of computing depreciation to the straight-line method for the equipment, but no change was made in the estimated service life or salvage value. It was also decided to change the total estimated service life of the building from 40 years to 35 years, with no change in the estimated salvage value. The building is depreciated on the straight-line method. (a) (b) No. Account Titles and Explanation (a) (b) Prepare the general journal entry to record depreciation expense for the equipment in 2025. Prepare the journal entry to record depreciation expense for the building in 2025. Depreciation Expense Accumulated Depreciation-Equipment $621,000 $5,007,000 Depreciation Expense Accumulated Depreciation-Buildings Debit Credit 0000
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:Pharoah Inc. acquired the following assets in January 2023.
Equipment, estimated service life, 5 years; no salvage value
Building, estimated service life, 40 years; salvage value, $567,000
The equipment has been depreciated using the double-declining balance method for the first 2 years for financial reporting purposes.
In 2025, the company decided to change the method of computing depreciation to the straight-line method for the equipment, but no
change was made in the estimated service life or salvage value. It was also decided to change the total estimated service life of the
building from 40 years to 35 years, with no change in the estimated salvage value. The building is depreciated on the straight-line
method.
(a)
Prepare the general journal entry to record depreciation expense for the equipment in 2025.
(b) Prepare the journal entry to record depreciation expense for the building in 2025.
No. Account Titles and Explanation
(a)
(b)
Depreciation Expense
Accumulated Depreciation-Equipment
$621,000
$5,007,000
Depreciation Expense
Accumulated Depreciation-Buildings
Debit
Credit
DOOD
0000
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