Q5. PQR Corporation purchased equipment to be used in manufacturing. The purchase was made at the beginning of 2020 by paying cash of $150,000. The equipment has an estimated residual value of $10,000 and an expected useful life of 10 years. At the beginning of 2022, PQR concluded that the total useful life of the equipment will be 8 years rather than 10, and that the residual value will be zero. PQR uses the straight-line method for depreciation and prepares financial statements annually as of December 31. No adjusting entries are made other than at year-end. Required: A. Prepare the journal entry to record depreciation on the equipment for 2021 (as of 12/31/21). B. Prepare the journal entry to record depreciation on the equipment for 2022 (as of 12/31/22), including the effect of the changes in estimates.
Q5. PQR Corporation purchased equipment to be used in manufacturing. The purchase was made at the beginning of 2020 by paying cash of $150,000. The equipment has an estimated residual value of $10,000 and an expected useful life of 10 years. At the beginning of 2022, PQR concluded that the total useful life of the equipment will be 8 years rather than 10, and that the residual value will be zero. PQR uses the straight-line method for depreciation and prepares financial statements annually as of December 31. No adjusting entries are made other than at year-end. Required: A. Prepare the journal entry to record depreciation on the equipment for 2021 (as of 12/31/21). B. Prepare the journal entry to record depreciation on the equipment for 2022 (as of 12/31/22), including the effect of the changes in estimates.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Answer both A and B
Transcribed Image Text:Q5. PQR Corporation purchased equipment to be used in manufacturing. The purchase was made at the beginning of
2020 by paying cash of $150,000. The equipment has an estimated residual value of $10,000 and an expected useful life
of 10 years. At the beginning of 2022, PQR concluded that the total useful life of the equipment will be 8 years rather
than 10, and that the residual value will be zero. PQR uses the straight-line method for depreciation and prepares
financial statements annually as of December 31. No adjusting entries are made other than at year-end.
Required:
A. Prepare the journal entry to record depreciation on the equipment for 2021 (as of 12/31/21).
B. Prepare the journal entry to record depreciation on the equipment for 2022 (as of 12/31/22), including the effect of
the changes in estimates.
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