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Sandhill Co. purchased a equipment on January 1, 2015, for $599,500. At that time, it was...

Question:

Sandhill Co. purchased a equipment on January 1, 2015, for $599,500. At that time, it was estimated that the equipment would have a 1D-year life and no salvage value. On December 31, 2018, the firm's accountant found that the entry for depreciation expense had been omitted in 2016. In addition, management has informed the accountant that the company plans to switch to straight-line depreciation, starting with the year 2018. At present, the company uses the sum-of-the-years'-digits method for depreciating equipment.

Prepare the general journal entries that should be made at December 31, 2018, to record these events.

Change in Accounting Estimate:

The change in accounting estimate is treated prospectively which means that it does not affect the prior period. It only affects the current period or the period in which the change has been decided by the management.

Answer and Explanation:

Sum of the Years Digit = 1+2+3+4+5+6+7+8+9+10

Sum of the Years Digit = 55


Total Sum of the years digit in Year 3 (2015 to 2017) = 6/55


Cost 599,500
Sum of Life in 3 years 6
Total 3,597,000
SYD 55
Depreciation as of 2017 65,400


Cost 599,500
Accumulated Depreciation (2015 to 2017) -65,400
Book Value, Beginning 2018 534,100
Remaining Life 7
Depreciation Expense-2018 76,300


Depreciation Expense 76,300
Accumulated Depreciation 76,300

Learn more about this topic:

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Methods of Depreciation

from Business 110: Business Math

Chapter 6 / Lesson 1
18K

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