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
|Sum of Life in 3 years||6|
|Depreciation as of 2017||65,400|
|Accumulated Depreciation (2015 to 2017)||-65,400|
|Book Value, Beginning 2018||534,100|
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from Business 110: Business MathChapter 6 / Lesson 1