Change in Estimate

Equipment costing $180,000 with a useful life of 20 years and a residual value of $20,000 has been depreciated for 5 years using the straight-line method. At the beginning of the sixth year, management revises the total useful life of the equipment to 12 years.

Instructions

Based on the foregoing data, answer the following questions

a. What is the annual depreciation expense?

b. What is the accumulated depreciation at the end of the 5 years?

c. What is the book value of the equipment at the beginning of the sixth year?

d. What is the annual depreciation starting with the 6 year?

e. Make the journal entry to record depreciation expense for the year 6.