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During 2019 and 2020, Faulkner Manufacturing used the sum-of-the-years-digits (SYD) method of depreciation for its depreciable assets, for both financial reporting and tax purposes. At

During 2019 and 2020, Faulkner Manufacturing used the sum-of-the-years-digits (SYD) method of depreciation for its depreciable assets, for both financial reporting and tax purposes. At the beginning of 2021, Faulkner decided to change to the straight-line method for both financial reporting and tax purposes. A tax rate of 25% is in effect for all years. For an asset that cost $16,000 with an estimated residual value of $1,000 and an estimated useful life of 10 years, the depreciation under different methods is as follows:

Year Straight Line SYD Difference
2019 $ 1,500 $ 2,727 $ 1,227
2020 1,500 2,455 955
$ 3,000 $ 5,182 $ 2,182

Required: 1. Prepare the journal entry that Faulkner will record in 2021 related to the change. 2. Suppose instead that Faulkner previously used straight-line depreciation and changed to sum-of-the-years- digits in 2021. Prepare the journal entry that Faulkner will record in 2021 related to the change.

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