Question

Irwin, Inc., constructed a machine at a total cost of $32 million. Construction was completed at the end of 2014 and the machine was placed in service at the beginning of 2015. The machine was being depreciated over a 10-year life using the straight-line method. The residual value is expected to be $2 million. At the beginning of 2018, Irwin decided to change to the sum-of-the-years’-digits method. Ignoring income taxes, prepare the journal entry relating to the machine for 2018. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Enter your answers in millions rounded to 2 decimal places (i.e., 5,500,000 should be entered as 5.50).) Answer is complete but not entirely correct. N . General Journal Credit No 1 Event 1 Debit 2.47% Credit L Depreciation expense Accumulated depreciation 2.47

Answer 1

Here two possible answers-

1) If Retrospective effect not applicable:

Depreciation Expense	5.25
To Accumulated Depreciation		5.25

Notes

Cost of Machine	32
Residual Value	-2
	30
Useful Life (Years)	10
Depreciation as per Straight line method
2015	3
2016	3
2017	3
	9
WDV as on 1.1.18	23
Residual Value	-2
	21

New method of Depreciation

Sum of the years' digits method

	Year	Weight	Depreciation
1	2018	7	5.25	(21/28*7)
2	2019	6	4.5	(21/28*6)
3	2020	5	3.75	(21/28*5)
4	2021	4	3	(21/28*4)
5	2022	3	2.25	(21/28*3)
6	2023	2	1.5	(21/28*2)
7	2024	1	0.75	(21/28*1)
		28	21

2) If Retrospective effect applicable:

Depreciation Expense	9.55
To Accumulated Depreciation		9.55

Notes:

Cost of Machine	32
Residual Value	-2
	30
Useful Life (Years)	10
Depreciation as per Straight line method
2015	3
2016	3
2017	3
Total Depreciation Provided	9

	Year	Weight	Depreciation	Cumulative
1	2015	10	5.45	5.45
2	2016	9	4.91	10.36
3	2017	8	4.36	14.73
4	2018	7	3.82	18.55
5	2019	6	3.27
6	2020	5	2.73
7	2021	4	2.18
8	2022	3	1.64
9	2023	2	1.09
10	2024	1	0.55
		55	30.00

Accumulated Depreciation Required at the end of 2018				18.55
Total depreciation provided till date				-9
Depreciation to be provided in 2018				9.55

Hope you understood. Thank you