10 On December 31, 20X3, before the books were closed, the management and accountants of Gering, Inc. made the 11 following analyses about three pieces of equipment owned by the company. GERING, INC. INFORMATION RELATED TO EQUIPMENT OWNED BY COMPANY AT DECEMBER 31, 20X3 (1) Equipment A was purchased on January 2, 20X0. For depreciation purposes, straight line depreciation was originally used. In 20X3, it was decided that the depreciation method for this equipment should be changed to the sum-of-the-years'-digits method. The original estimates for this asset at the time of purchase, which have not changed, are given below. Cost of equipment $ Estimated useful life in years Estimated salvage value (2) Equipment B was purchased on January 3, 20W9 (5 years ago). For depreciation purposes, the straight line method has been used. In 20X3, the decision was made to reduce the total life of this asset as well as the salvage value of the asset. Information related to this asset is provided below. Cost of equipment Original estimated useful life in years Original estimated salvage value New estimated useful life in years New estimated salvage value 2=28=29=28ANAXARARARINAAR 12 13 14 15 16 17 18 19 20 21 23 24 26 27 30 31 32 33 34 35 36 37 36 $ S $ $ 540,000 10 180,000 15 9 3,000 8 (3) Equipment C was purchased January 5, 20W9. The asset's original cost was entirely expensed during 20W9. The information related to this asset, which should have been depreciated using the straight line method of depreciation, has the following information available. Cost of equipment Original estimated useful life in years' Original estimated salvage value $ GERING, INC. ADDITIONAL FINANCIAL INFORMATION FOR COMPANY (1) Income reported in 20X3 before any depreciation expense (2) 20X3 depreciation expense on assets other than A, B, and C (3) Income reported in 20X2 400,000 55,000 370,000 200,000 (4) The retained earnings balance in the company's books at January 1, 20X2 (5) Ignore all income tax calculations in your analyses 62 REQUIRED: (1) Prepare the general journal entry in 20X3 to make the appropriate adjustments for Equipment A 63 due to the change in depreciation methods and record the depreciation for 20X3 depreciation using the new method. Round all supporting calculations to the nearest whole dollar. (2) Prepare the general journal entry in 20X3 to record the new depreciation amount for Equipment B based on the revised estimates. Round all supporting calculations to the nearest whole dollar. 9 0 1 3 14 45 46 47 48 49 Gering also has the additional data provided below. 50 51 52 53 54 55 56 57 58 && I & SESSE 59 60 160,000 10 tenore all income tax calculations in your analyses 60 61 REQUIRED: (1) Prepare the general journal entry in 20X3 to make the appropriate adjustments for Equipment A 3 due to the change in depreciation methods and record the depreciation for 20X3 depreciation using the new method. Round all supporting calculations to the nearest whole dollar. - (2) Prepare the general journal entry in 20X3 to record the new depreciation amount for Equipment B based on the revised estimates. Round all supporting calculations to the nearest whole dollar. (3) Prepare the general journal entry in 20X3 to make the appropriate adjustments for Equipment C due to the correction of the error made in a previous year and record the depreciation for 20X3 based on the correction made. Round all supporting calculations to the nearest whole dollar. (4) Based on all of the appropriate adjustments made, calculate the amount of net income that the company should report for 20X3. Show all appropriate calculations. (5) Prepare comparative statements of retained earnings, in proper form, for 20X2 and 20X3. Be sure: to explain all adjustments made. 58 59 5 5