Question

Machinery purchased for $73,800 by Blossom Co. in 2016 was originally estimated to have a life of 8 years with a salvage value of $4,920 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 $5,535 at the end of that time. Assume straight-line depreciation.

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 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Account Titles and Explanation	Debit	Credit
enter an account title	enter a debit amount	enter a credit amount
enter an account title	enter a debit amount	enter a credit amount

Prepare the entry to record depreciation for 2021. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually. Use Machinery related account.)

Account Titles and Explanation	Debit	Credit
enter an account title	enter a debit amount	enter a credit amount
enter an account title	enter a debit amount	enter a credit amount

Answer 1

1
Account Titles and Explanation	Debit	Credit
No entry	0
No entry		0
2
Account Titles and Explanation	Debit	Credit
Depreciation expense	5043
Accumulated Depreciation-Machinery		5043
Workings:
Cost of machine	73800
Less: Salvage value	4920
Depreciable cost	68880
Divide by Useful life	8
Annual Depreciation	8610
Accumulated Depreciation	43050	=8610*5
Book value	30750	=73800-43050
Less: Salvage value	5535
Depreciable cost	25215
Divide by Useful life	5
Revised Annual Depreciation	5043