Question

Machinery purchased for $70,200 by Sheffield Co. in 2016 was originally estimated to have a life of 8 years with a salvage value of $4,680 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 $5,265 at the end of that time. Assume straight-line depreciation.

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

Prepare an entry to record depreciation for 2021.

Answer 1

1
	Debit	Credit
No entry	0
No entry		0
2
	Debit	Credit
Depreciation expense	4797
Accumulated depreciation-Machinery		4797
Workings:
Cost of Machinery	70200
Less: Salvage value	4680
Depreciable cost	65520
Divide by Useful life	8
Annual Depreciation	8190
Accumulated Depreciation for 5 years	40950	=8190*5
Book value at the end of Year 5	29250	=70200-40950
Book value at the end of Year 5	29250
Less: Revised Salvage value	5265
Remaining Depreciable cost	23985
Divide by Remaining Useful life	5
Annual Depreciation	4797