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Lin Lid constructed a machine at a total cost of $35 million. Construction was completearnett en the machine was placed in service at the beginning of 2009. The machine was being depreciated over a 10-year life using the double-declining-balance method. An annual rate of 20% is applied under the double-declining. balance method. The residual value is expected to be $2 million. At the beginning of 2012, Lin decided to change to the straight-line method. Ignoring income taxes, what joural entry(s) should Lin record relating to the machine for 2012?
Refer to the situation described in BE 20-4. Suppose Lin has been using the straight-line method and switches to the double-declining-balance method. An annual rate of 20% is to be applied under the new method. Ignoring income taxes, what journal entry(s) should Lin record relating to the machine for 2012?
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makhine for 2012? Brief Exercise 20-5 A change in depreciation method is considered a change in accounting estimate resulting from a change in the expected pattern of benefits to be derived from the asset. In other words, a change in the depreciation method is similar to changing the economic useful life of a depreciable asset, and therefore the two events should be reported the same way. Accordingly, Irwin reports the change prospectively; previous financial statements are not revised. Instead, the undepreciated cost remaining at the time of the change would be depreciated by double declining balance method over the remaining useful life. ( $ in millions) Asset's cost $35.0 Accumulated depreciation to date (calculated below) (9.9) Undepreciated cost, Jan. 1, 2012$25.1 Estimated residual value (2.0) To be depreciated over remaining 7 years $23.1 Calculation of straight-line depreciation to date ($352)10 years =$3.33 years =$9.9 Adjusting entry (2012 depreciation): ( $ in millions) Depreciation expense (calculated below) Accumulated depreciation 4.62 Calculation of DDB depreciation $23.1m0.20=$4.62m Brief Exercise 20-5 A change in depreciation method is considered a change in accounting estimate resulting from a change in the expected pattern of benefits to be derived from the asset. In other words, a change in the depreciation method is similar to changing the economic useful life of a depreciable asset, and therefore the two events should be reported the same way. Accordingly, Irwin reports the change prospectively; previous financial statements are not revised. Instead, the undepreciated cost remaining at the time of the change would be depreciated by double declining balance method over the remaining useful life. ( $ in millions) Asset's cost $35.0 Accumulated depreciation to date (calculated below) (9.9) Undepreciated cost, Jan. 1, 2012$25.1 Estimated residual value (2.0) To be depreciated over remaining 7 years $23.1 Calculation of straight-line depreciation to date ($352)10 years =$3.33 years =$9.9 Adjusting entry (2012 depreciation): (\$ in millions) Depreciation expense (calculated below) 4.62 Accumulated depreciation 4.62 Calculation of DDB depreciation $23.1m0.20=$4.62m makhine for 2012? Brief Exercise 20-5 A change in depreciation method is considered a change in accounting estimate resulting from a change in the expected pattern of benefits to be derived from the asset. In other words, a change in the depreciation method is similar to changing the economic useful life of a depreciable asset, and therefore the two events should be reported the same way. Accordingly, Irwin reports the change prospectively; previous financial statements are not revised. Instead, the undepreciated cost remaining at the time of the change would be depreciated by double declining balance method over the remaining useful life. ( $ in millions) Asset's cost $35.0 Accumulated depreciation to date (calculated below) (9.9) Undepreciated cost, Jan. 1, 2012$25.1 Estimated residual value (2.0) To be depreciated over remaining 7 years $23.1 Calculation of straight-line depreciation to date ($352)10 years =$3.33 years =$9.9 Adjusting entry (2012 depreciation): ( $ in millions) Depreciation expense (calculated below) Accumulated depreciation 4.62 Calculation of DDB depreciation $23.1m0.20=$4.62m Brief Exercise 20-5 A change in depreciation method is considered a change in accounting estimate resulting from a change in the expected pattern of benefits to be derived from the asset. In other words, a change in the depreciation method is similar to changing the economic useful life of a depreciable asset, and therefore the two events should be reported the same way. Accordingly, Irwin reports the change prospectively; previous financial statements are not revised. Instead, the undepreciated cost remaining at the time of the change would be depreciated by double declining balance method over the remaining useful life. ( $ in millions) Asset's cost $35.0 Accumulated depreciation to date (calculated below) (9.9) Undepreciated cost, Jan. 1, 2012$25.1 Estimated residual value (2.0) To be depreciated over remaining 7 years $23.1 Calculation of straight-line depreciation to date ($352)10 years =$3.33 years =$9.9 Adjusting entry (2012 depreciation): (\$ in millions) Depreciation expense (calculated below) 4.62 Accumulated depreciation 4.62 Calculation of DDB depreciation $23.1m0.20=$4.62m
