Question

Machinery purchased for $69,600 by Tamarisk Co. in 2016 was originally estimated to have a life of 8 years with a salvage value of $4,640 at the end of that time. Depreciation has been entered for 5 years on this basis. In 2021, it is determined that the total estimated life should be 10 years with a salvage value of $5,220 at the end of that time. Assume straight-line depreciation.

Prepare the entry to correct the prior years' depreciation, if necessary.

Machinery purchased for $69.600 by Tamarisk Co. in 2016 was originally estimated to have a life of 8 years with a salvage value of $4,640 at the end of that time Depreciation has been entered for 5 years on this basis. In 2021, it is determined that the total estimated life should be 10 years with a salvage value of $5.220 at the end of that time. Assume straight-line depreciation. Your answer is partially correct. Prepare the entry to correct the prior years' depreciation, if necessary. (if no entry is required, select "No entry for the account titles and enter for the amounts Credit account titles are automatically indented when amount is entered. Do not indent manually) Account Titles and Explanation Debit Credit

Answer 1

Account Titles and Explanation	Debit	Credit
Accumulated Depreciation - Machinery	$8,120
Depreciation Expense - Machinery		$8,120
(To record the reversal of depreciation that was charged)
Account Titles and Explanation	Debit	Credit
Depreciation Expense - Machinery	$6,496
Accumulated Depreciation - Machinery		$6,496
(To record the charging of depreciation for 2021)

Working notes:

Depreciation charged in previous years:
Cost of the Machinery	$69,600
Less: Salvage Value	($4,640)
Depreciable Value (a)	$64,960
Number of year of useful (b)	8	Years
Depreciation per year charged (c = a/b)	$8,120
Total depreciation charged for 5 years (c * 5 years)	$40,600
New depreciation:
Cost of the Machinery	$69,600
Less: Salvage Value	($4,640)
Depreciable Value (a)	$64,960
Number of year of useful (b)	10	Years
Depreciation per year charged (c = a/b)	$6,496
Total depreciation should be charged for 5 years (c * 5 years)	$32,480
Excess depreciation charged in previous years ($40,600 - $32,480)	$8,120