For financial reporting, Clinton Poultry Farms has used the declining-balance method of depreciation for conveyor equipment acquired at the beginning of 2018 for $2,750,000. Its useful life was estimated to be five years, with a $155,000 residual value. At the beginning of 2021, Clinton decides to change to the straight-line method. The effect of this change on depreciation for each year is as follows:_______.
($ in thousands)
Year Straight Line Declining Balance Difference
2018 $ 548 $ 1,200 $ 652
2019 548 720 172
2020 548 432 (116 )
$ 1,644 $ 2,352 $ 708
Required:
Prepare any 2021 journal entry related to the change.

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abiolataiwo2015 abiolataiwo2015 · Answer 1 · 2021-04-06T10:13:03+02:00

Answer:

Dr Depreciation expense(notes) $81,000

Cr To Accumulated depreciation $81,000

Explanation:

Preparation of any 2021 journal entry related to the change.

First step is to Compute the new depreciation related to the change.

Details Amount

Asset’s cost at the beginning $2,750,000

Accumulated depreciation to date ($ 2,352,000)

Less Undepreciated cost $ 398,000

($2,750,000- $2,352,000)

Less Estimated residual value ($155,000)

To be depreciated over remaining 3 years $ 243,000

($398,000-$155,000)

Annual straight-line depreciation for remaining 3 years =$ 243,000/ 3 years $81,000

Now let prepare the Journal entry

Dr Depreciation expense(notes) $81,000

Cr To Accumulated depreciation $81,000