Question

Machinery purchased for $46,600 by Martinez Corp. on January 1, 2015, was originally estimated to have an 8-year useful life with a residual value of $5,000. Depreciation has been entered for five years on this basis. In 2020, it is determined that the total estimated useful life (including 2020) should have been 10 years, with a residual value of $6,000 at the end of that time. Assume straight-line depreciation and that Martinez Corp. uses IFRS for financial statement purposes. Prepare the entry that is required to correct the prior years' depreciation, if any. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter for the amounts.) Account Titles and Explanation Debit Credit e Textbook and Media List of Accounts Prepare the entry to record depreciation for 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry"for the account titles and enter 0 for the amounts) Account Titles and Explanation Debit Credit

Answer 1

Solution Cost of machinery = $46,600 Date of Purchase = orlail15 Useful life : 8 yrs. Residual value = $5,000, Dep. p.a.s (46;600 -5000) : $5200, 2020 Reuirod useful life 10yrs. Yoars already passed : syrs. Remaining üfé - (10-5) = 5 yuo. Revised residual value = $6000. Balance as at 01101120 = 46,600 -(520045) = $ 20,600 Depreciation pia: = (20,600 -6000) 15 = $2,920 As this is a change in accounting estimater, there will not be any retrospective effect. | Hence, no prior year entry is required. Debit Credit I Depreciation Exponses $2,920 Accumulated Dep - Machines $2,920 (Being depreciation recorded)

is higher of the - Under ASPE, depreciation following amount : » (Cost - Bulvape Vale) Total life | 2) (Cost - Residud value) Useful life Depreciation p.a.: (46,600 -0 = $5,482 8.5 | 22 Deprecahan p.. = (46,600 - 200) =34216 There fore; 2020 onwards, - Depreciation = $5,482 p.a. Debit Depreciation expenses 5,462 Accumulated Depreciation Machinery Credit 5,482

Depreciation rate = 100 x 2 = 25% Year 2015 2016 2017 2018 2019 Opening 46,600 34,950 26,213 19,660 14,745 Depreciation 11,650 8737 6552 4, 915 36,86 Balance 34,950 26,213 19,660 14,745 11,059 2020 Balance = 11,059 Romainly life = 5yrs. Depreciation rate = 100 x 2 = 40% Depreciation for 2020 = 11,059 X 40% = $4,424 Dobil $4,424 Depreciation Expenses Accumulated Depreciation (Being Depreciation recorded) $4,424