Recording and Reporting a Change in Depreciation Estimate Bellico Company, which has a calendar fiscal year, purchased its only depreciable plant asset on January 1, 2019, and depreciates it using the following information. Original cost $12,000 Estimated residual value 1,200 Estimated useful life Three years Depreciation method Sum-of-years’-digits In 2020, Bellico increased the estimated residual value to $2,400 and increased the total estimated useful life to five years for financial accounting purposes. Additional information follows. Item 2019 2020 Revenue $48,000 $60,000 Expenses other than depreciation and tax 30,000 36,000 Tax rate 30% 30% a. Provide the 2019 entry for depreciation and the ending 2019 accumulated depreciation balance. Date Account Name Dr. Cr. Dec. 31, 2019 Answer Answer Answer Answer Accumulated depreciation, December 31, 2019 Answer b. Provide the 2020 entry for depreciation and the ending 2020 accumulated depreciation balance. Date Account Name Dr. Cr. Dec. 31, 2020 Answer Answer Answer Answer Accumulated depreciation, December 31, 2020 Answer c. Provide the comparative 2019 and 2020 income statements, including disclosures related to the change in accounting estimate. Note: Do not use negative signs with your answers. Bellico Company Income Statement, for year ended Dec. 31 2019 2020 Revenues Answer Answer Expenses other than depreciation and tax Answer Answer Depreciation expense Answer Answer Income before tax Answer Answer Income tax expense (30%) Answer Answer Net income Answer Answer Disclosure During 2020, the estimated useful life and residual value on a plant asset were changed in light of new information. The change increased net income by Answer

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

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Recording and Reporting a Change in Depreciation Estimate

Bellico Company, which has a calendar fiscal year, purchased its only depreciable plant asset on January 1, 2019, and depreciates it using the following information.

Original cost	$12,000
Estimated residual value	1,200
Estimated useful life	Three years
Depreciation method	Sum-of-years’-digits

In 2020, Bellico increased the estimated residual value to $2,400 and increased the total estimated useful life to five years for financial accounting purposes. Additional information follows.

Item	2019	2020
Revenue	$48,000	$60,000
Expenses other than depreciation and tax	30,000	36,000
Tax rate	30%	30%

a. Provide the 2019 entry for depreciation and the ending 2019 accumulated depreciation balance.

Date	Account Name	Dr.	Cr.
Dec. 31, 2019		Answer	Answer
		Answer	Answer

Accumulated depreciation, December 31, 2019

Answer

b. Provide the 2020 entry for depreciation and the ending 2020 accumulated depreciation balance.

Date	Account Name	Dr.	Cr.
Dec. 31, 2020		Answer	Answer
		Answer	Answer

Accumulated depreciation, December 31, 2020

Answer

c. Provide the comparative 2019 and 2020 income statements, including disclosures related to the change in accounting estimate.

Note: Do not use negative signs with your answers.

Bellico Company Income Statement, for year ended Dec. 31	2019	2020
Revenues	Answer	Answer
Expenses other than depreciation and tax	Answer	Answer
Depreciation expense	Answer	Answer
Income before tax	Answer	Answer
Income tax expense (30%)	Answer	Answer
Net income	Answer	Answer

Disclosure
During 2020, the estimated useful life and residual value on a plant asset were changed in light of new information. The change increased net income by	Answer

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