Change in estimate; useful life and residual value of equipment
Response to the following problem:
Wardell Company purchased a minicomputer on January 1, 2014, at a cost of $40,000. 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, 2016, 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 2016 to reflect the revised estimate.
2. Repeat requirement 1 assuming that the company uses the sum-of-the-years'-digits method instead of the straight-line method.