Depreciation calculations, entries, effects and choice At the beginning of 2021, HQ Corporation acquired machinery that cost $100 000 and had an anticipated useful life of 10 years. HQ Corporation depreciated this machinery for 2021 and 2022, using the straight-line method. During 2023, it decided to change to the reducing balance method of depreciation.

1 Prepare the journal entry to record depreciation expense for 2022, using the straight-line method.

2 Prepare the journal entry to record depreciation expense for 2022 using the reducing balance method, at a rate of 20 per cent.

3 Show the effects of changing from the straight-line method to the 20 per cent reducing balance method on:

a the net profit before tax for 2023.

b the total assets for 2022.

4 In what circumstances is the use of reducing balance depreciation more appropriate than using the straightline method?