Eagle Company purchased a piece of machinery for $75,000 on January 1, 20x1, and has been depreciating the machine using the double-declining-balance method based on a five-year estimated useful life and no salvage value. On January 1, 20x3, Eagle decided to switch to the straight-line method of depreciation. The residual value is still zero and the estimated useful life did not change. Required: a) Prepare the appropriate journal entry, if any, to record the accounting change. b) Prepare the journal entry to record depreciation for 20x3.
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.
Eagle Company purchased a piece of machinery for $75,000 on January 1, 20x1, and has been
Required:
a) Prepare the appropriate
b) Prepare the journal entry to record depreciation for 20x3.
Huckleberry Company purchased a machine on January 1, 20x1. The machine had a cost of $350,000 with a $10,000 residual value. The estimated useful life of the machine was eight years. On January 1, 20x3, due to technological innovations, the estimated useful life was reduced by two years from the original life and the residual value was reduced by 50%. The company uses straight-line depreciation.
Required:
Prepare the journal entry to record the annual depreciation on December 31, 20x3.
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