Described below are three independent and unrelated situations involving accounting changes. Each change occurs during 2018 before
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Question:
Described below are three independent and unrelated situations involving accounting changes. Each change occurs during 2018 before any adjusting entries or closing entries are prepared.
- On December 30, 2014, Rival Industries acquired its office building at a cost of $10,200,000. It has been depreciated on a straight-line basis assuming a useful life of 40 years and no residual value. Early in 2018, the estimate of useful life was revised to 28 years in total with no change in residual value.
- At the beginning of 2014, the Hoffman Group purchased office equipment at a cost of $385,000. Its useful life was estimated to be 10 years with no residual value. The equipment has been depreciated by the sum-of-the-years'-digits method. On January 1, 2018, the company changed to the straight-line method.
- At the beginning of 2018, Jantzen Specialties, which uses the sum-of-the-years'-digits method, changed to the straight-line method for newly acquired buildings and equipment. The change increased current year net income by $465,000.
Required:
1.Identify the type of change.
2.Prepare ny journal entry necessary as a direct result of the change as well as any adjusting entry for 2018 related to the situation described. (Ignore income tax effects.)
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