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Stellar Company is in the process of preparing its financial statements for 2025. Assume that no entries for depreciation have been recorded in 2025. The following information related to depreciation of fixed assets is provided to you. 1. Stellar purchased equipment on January 2, 2022, for $87,000. At that time, the equipment had an estimated useful life of 10 years with a $5,000 salvage value. The equipment is depreciated on a straight-line basis. On January 2, 2025, as a result of additional information, the company determined that the equipment has a remaining useful life of 4 years with a $3,200 salvage value. 2. During 2025, Stellar changed from the double-declining-balance method for its building to the straight-line method. The building originally cost $270,000. It had a useful life of 10 years and a salvage value of $27,000. The following computations present depreciation on both bases for 2023 and 2024. 2024 Straight-line 2023 $24,300 $24,300 Declining-balance 43,200 54,000

Stellar Company is in the process of preparing its financial statements for 2025. Assume that no entries for depreciation have been recorded in 2025. The following information related to depreciation of fixed assets is provided to you. 1. Stellar purchased equipment on January 2, 2022, for $87,000. At that time, the equipment had an estimated useful life of 10 years with a $5,000 salvage value. The equipment is depreciated on a straight-line basis. On January 2, 2025, as a result of additional information, the company determined that the equipment has a remaining useful life of 4 years with a $3,200 salvage value. 2. During 2025, Stellar changed from the double-declining-balance method for its building to the straight-line method. The building originally cost $270,000. It had a useful life of 10 years and a salvage value of $27,000. The following computations present depreciation on both bases for 2023 and 2024. 2024 Straight-line 2023 $24,300 $24,300 Declining-balance 43,200 54,000

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Stellar Company is in the process of preparing its financial statements for 2025. Assume that no entries for depreciation have been recorded in 2025. The following information related to depreciation of fixed assets is provided to you. 1. 2. 3. Stellar purchased equipment on January 2, 2022, for $87,000. At that time, the equipment had an estimated useful life of 10 years with a $5,000 salvage value. The equipment is depreciated on a straight-line basis. On January 2, 2025, as a result of additional information, the company determined that the equipment has a remaining useful life of 4 years with a $3,200 salvage value. During 2025, Stellar changed from the double-declining-balance method for its building to the straight-line method. The building originally cost $270,000. It had a useful life of 10 years and a salvage value of $27,000. The following computations present depreciation on both bases for 2023 and 2024. 2024 Straight-line $24,300 Declining-balance 43,200 2023 $24,300 54,000 Stellar purchased a machine on July 1, 2023, at a cost of $110,000. The machine has a salvage value of $18,000 and a useful life of 8 years. Stellar's bookkeeper recorded straight-line depreciation in 2023 and 2024 but failed to consider the salvage value.
Transcribed Image Text:Stellar Company is in the process of preparing its financial statements for 2025. Assume that no entries for depreciation have been recorded in 2025. The following information related to depreciation of fixed assets is provided to you. 1. 2. 3. Stellar purchased equipment on January 2, 2022, for $87,000. At that time, the equipment had an estimated useful life of 10 years with a $5,000 salvage value. The equipment is depreciated on a straight-line basis. On January 2, 2025, as a result of additional information, the company determined that the equipment has a remaining useful life of 4 years with a $3,200 salvage value. During 2025, Stellar changed from the double-declining-balance method for its building to the straight-line method. The building originally cost $270,000. It had a useful life of 10 years and a salvage value of $27,000. The following computations present depreciation on both bases for 2023 and 2024. 2024 Straight-line $24,300 Declining-balance 43,200 2023 $24,300 54,000 Stellar purchased a machine on July 1, 2023, at a cost of $110,000. The machine has a salvage value of $18,000 and a useful life of 8 years. Stellar's bookkeeper recorded straight-line depreciation in 2023 and 2024 but failed to consider the salvage value.
Prepare the journal entries to record depreciation expense for 2025 and correct any errors made to date related to the information provided. (Ignore taxes.) (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 all debit entries before credit entries.) 1. 2. 3. Your answer is partially correct. No. Account Titles and Explanation 1. 2 Depreciation Expense Accumulated Depreciation-Equipment Depreciation Expense Depreciation Expense Accumulated Depreciation-Equipment Depreciation Expense Accumulated Depreciation-Buildings Depreciation Expense Accumulated Depreciation-Machinery (To record current year depreciation.) Accumulated Depreciation-Machinery Retained Earnings (To correct prior year depreciation.) Debit Credit
Transcribed Image Text:Prepare the journal entries to record depreciation expense for 2025 and correct any errors made to date related to the information provided. (Ignore taxes.) (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 all debit entries before credit entries.) 1. 2. 3. Your answer is partially correct. No. Account Titles and Explanation 1. 2 Depreciation Expense Accumulated Depreciation-Equipment Depreciation Expense Depreciation Expense Accumulated Depreciation-Equipment Depreciation Expense Accumulated Depreciation-Buildings Depreciation Expense Accumulated Depreciation-Machinery (To record current year depreciation.) Accumulated Depreciation-Machinery Retained Earnings (To correct prior year depreciation.) Debit Credit
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