Holtzman Company is in the process of preparing its financial statements for 2020. Assume that no entries for depreciation have been recorded in 2020. The following information related to depreciation of fixed assets is provided to you. 1. 2. 3. (a) Holtzman purchased equipment on January 2, 2017, for $102,000. At that time, the equipment had an estimated useful life of 10 years with a $6,000 residual value. The equipment is depreciated on a straight-line basis. On January 2, 2020, as a result of additional information, the company determined that the equipment has a remaining useful life of 4 years with a $3,600 residual value. During 2020, Holtzman changed from the double-declining-balance method for its building to the straight-line method. The building originally cost $360,000. It had a useful life of 10 years and a residual value of $36,000. The following calculations present depreciation on both bases for 2018 and 2019. Straight- Line 2018 $32,400 32,400 2019 Double-Declining -Balance $72,000 57,600 Holtzman purchased a machine on July 1, 2018, at a cost of $144,000. The machine has a residual value of $19.,200 and a useful life of 8 years. Holtzman's bookkeeper recorded straight-line depreciation in 2018 and 2019 but failed to consider the residual value. Prepare the journal entries to record depreciation expense for 2020 and correct any errors made to date related to the information provided. (Ignore income tax considerations) (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)
Holtzman Company is in the process of preparing its financial statements for 2020. Assume that no entries for depreciation have been recorded in 2020. The following information related to depreciation of fixed assets is provided to you. 1. 2. 3. (a) Holtzman purchased equipment on January 2, 2017, for $102,000. At that time, the equipment had an estimated useful life of 10 years with a $6,000 residual value. The equipment is depreciated on a straight-line basis. On January 2, 2020, as a result of additional information, the company determined that the equipment has a remaining useful life of 4 years with a $3,600 residual value. During 2020, Holtzman changed from the double-declining-balance method for its building to the straight-line method. The building originally cost $360,000. It had a useful life of 10 years and a residual value of $36,000. The following calculations present depreciation on both bases for 2018 and 2019. Straight- Line 2018 $32,400 32,400 2019 Double-Declining -Balance $72,000 57,600 Holtzman purchased a machine on July 1, 2018, at a cost of $144,000. The machine has a residual value of $19.,200 and a useful life of 8 years. Holtzman's bookkeeper recorded straight-line depreciation in 2018 and 2019 but failed to consider the residual value. Prepare the journal entries to record depreciation expense for 2020 and correct any errors made to date related to the information provided. (Ignore income tax considerations) (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)
Intermediate Accounting: Reporting And Analysis
3rd Edition
ISBN:9781337788281
Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach
Chapter22: Accounting For Changes And Errors.
Section: Chapter Questions
Problem 8P: At the beginning of 2020, Holden Companys controller asked you to prepare correcting entries for the...
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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.
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Transcribed Image Text:(a)
Prepare the journal entries to record depreciation expeme for 2020 and correct any errors made to date related to the
information provided. (Ignore income tax considerations) (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)
No. Account Titles and Explanation
1.
2
3.
(To record depreciation expense)
(To record correction of depreciation recorded)
Debit
Credit
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(b)
The parts of this question must be completed in order. This part will be available when you complete the part above
Transcribed Image Text:Holtzman Company is in the process of preparing its financial statements for 2020. Assume that no entries for depreciation have been
recorded in 2020. The following information related to depreciation of foxed assets is provided to you.
1.
2.
3.
(a)
Holtzman purchased equipment on January 2, 2017, for $102,000. At that time, the equipment had an estimated useful life of
10 years with a $6,000 residual value. The equipment is depreciated on a straight-line basis. On January 2, 2020, as a result of
additional information, the company determined that the equipment has a remaining useful life of 4 years with a $3,600
residual value.
During 2020, Holtzman changed from the double-declining-balance method for its building to the straight-line method. The
building originally cost $360,000. It had a useful life of 10 years and a residual value of $36,000. The following calculations
present depreciation on both bases for 2018 and 2019.
Straight-
Line
2018 $32,400
2019
32,400
Double-Declining
-Balance
$72,000
57,600
Holtzman purchased a machine on July 1, 2018, at a cost of $144,000. The machine has a residual value of $19,200 and a
useful life of 8 years. Holtzman's bookkeeper recorded straight-line depreciation in 2018 and 2019 but failed to consider the
residual value.
Prepare the journal entries to record depreciation expense for 2020 and correct any errors made to date related to the
information provided. (Ignore income tax considerations.) (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)
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