Appropriate adjusting entry for depreciation


Question 1: Wardell Company purchased a minicomputer on January 1, 2009, at a cost of 440,000.  The computer was depreciated using the straight-line method over an estimated five-year life with an estimated residual value of $4,000.  On January 1, 2011, the estimate of useful life was changed to a total of 10 years, and the estimate of residual value was changed to $900.

Required

1. Prepare the appropriate adjusting entry for depreciation in 2011 to reflect the revised estimate

Question 2:

($ in 000s)

            Year                 Straight line                Declining Balance                   Difference

            2008                $ 400                           $ 853                                       $453

            2009                $ 400                           $ 569                                       $ 169

            2010                $ 400                           $379                                        $ (21)

                                    $1,200                         $1,801                                     $601

a. For financial reporting, Clinton Poultry Farm has used the declining balance method of depreciation for conveyor equipment acquired at the beginning 2008 for $2,560,000.  Its useful life was estimaterd to be six years, with a $160,000 residual balance.  At the beginning of 2011, Clinton decides to change to the straight line method.  The effect of this change on depreciation for each year is as follows:

Required

1. Briefly describe the way Clinton should report this accounting change in 2010-2011 comparative financial statements.

2. Prepare 2011 journal entry related to change

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Accounting Basics: Appropriate adjusting entry for depreciation
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