Rungano Corporation is a global publisher of magazines, books, and music, as well as video collections, and it is one of the world’s leading direct-mail marketers. Many direct- mail marketers use high- speed Didde press equipment to print their advertisements. These presses can cost more than $ 1 million. Assume that Rungano owns a Didde press acquired at an original cost of $ 1,200,000. It is being depreciated on a straight- line basis over a 20- year estimated useful life and has a $ 150,000 estimated residual value. At the end of 2015, the press had been depreciated for eight years. In January 2016, a decision was made, on the basis of improved maintenance procedures, that a total estimated useful life of 25 years and a residual value of $ 219,000 would be more realistic. The fiscal year ends December 31.
Required:
1. Compute (a) the amount of depreciation expense recorded in 2015 and (b) the carrying amount of the printing press at the end of 2015.
2. Compute the amount of depreciation that should be recorded in 2016. Show computations.
3. Prepare the adjusting entry to record depreciation expense at December 31, 2016.