Required: 1. In order to compare performance with Company A, estimate what B's depreciation expense would have been for 2024 if the double-declining-balance depreciation method had been used by Company B since acquisition of the depreciable assets. 2. If Company B decided to switch depreciation methods in 2024 from the straight line to the double-declining-balance method, prepare the 2024 journal entry to record depreciation for the year, assuming no journal entry for depreciation in 2024 has yet been recorded.
Required: 1. In order to compare performance with Company A, estimate what B's depreciation expense would have been for 2024 if the double-declining-balance depreciation method had been used by Company B since acquisition of the depreciable assets. 2. If Company B decided to switch depreciation methods in 2024 from the straight line to the double-declining-balance method, prepare the 2024 journal entry to record depreciation for the year, assuming no journal entry for depreciation in 2024 has yet been recorded.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Concept explainers
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.
Topic Video
Question
7
Transcribed Image Text:The fact that generally accepted accounting principles allow companies flexibility in choosing between certain allocation methods can
make it difficult for a financial analyst to compare periodic performance from firm to firm.
Suppose you were a financial analyst trying to compare the performance of two companies. Company A uses the double-declining-
balance depreciation method. Company B uses the straight-line method. You have the following information taken from the 12/31/2024
year-end financial statements for Company B:
Depreciation expense
Income Statement
Balance Sheet
Assets:
Plant and equipment, at cost
Less: Accumulated depreciation
Net
You also determine that all of the assets constituting the plant and equipment of Company B were acquired at the same time, and that
all of the $160,000 represents depreciable assets. Also, all of the depreciable assets have the same useful life and residual values are
zero.
Required 1
Required:
1. In order to compare performance with Company A, estimate what B's depreciation expense would have been for 2024 if the
double-declining-balance depreciation method had been used by Company B since acquisition of the depreciable assets.
2. If Company B decided to switch depreciation methods in 2024 from the straight line to the double-declining-balance method,
prepare the 2024 journal entry to record depreciation for the year, assuming no journal entry for depreciation in 2024 has yet
been recorded.
$8,000
Complete this question by entering your answers in the tabs below.
Required 2
No
1
View transaction list
If Company B decided to switch depreciation methods in 2024 from the straight line to the double-declining-balance method, prepare the
2024 journal entry to record depreciation for the year, assuming no journal entry for depreciation in 2024 has yet been recorded.
Note: If no entry is required for a transaction/event, select "No journal entry required" in the first account field.
$ 160,000
(32,000)
$ 128,000
Transaction
1
View journal entry worksheet
General Journal
Depreciation expense
Accumulated depreciation
Debit
Credit
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