Wilkinson Company changed depreciation methods in 2023 from double-declining-balance to straight-line. The accumulated depreciation prior to 2023 under double-declining-balance was $90,000, whereas the straight-line accumulated depreciation prior to 2023 would have been $50,000. Wilkinson’s depreciable assets had a cost of $250,000, with a $40,000 residual value and an 8-year remaining useful life at the beginning of 2023. Requirements: Discuss the appropriate accounting treatment for the above. Prepare the 2023 journal entry related to the depreciable assets if necessary. Ignore income tax effects. Show workings
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.
Following an internal audit of Wilkinson Limited, a manufacturing company for the year 2023, the following items were brought to the attention of the Accountant. The Accountant is unsure how to proceed. She has hired you as a consultant to assist her.
1.
Wilkinson Company changed depreciation methods in 2023 from double-declining-balance to straight-line. The
Requirements:
Discuss the appropriate accounting treatment for the above.
Prepare the 2023
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