Question
On January 1, 2011, Klinefelter Company purchased a building for $520,000. The building had an estimated life of 20 years and an estimated residual value
On January 1, 2011, Klinefelter Company purchased a building for $520,000. The building had an estimated life of 20 years and an estimated residual value of $20,000. The company has been depreciating the building using straight-line depreciation. At the beginning of 2017, the following independentsituations occur:
a. The company estimates that the building has a remaining life of 10 years (for a total of 16 years).
b. The company changes to the sum-of-the-years'-digits method.
c.The company discovers that it had ignored the estimated residual value in the computation of the annual depreciation each year.
Required:
For each of the independent situations, prepare all journal entries related to the building for 2017. Ignore income taxes.
CHART OF ACCOUNTS
Klinefelter Company
General Ledger
ASSETS
111
Cash
121
Accounts Receivable
141
Inventory
152
Prepaid Insurance
181
Equipment
189
Accumulated Depreciation
LIABILITIES
211
Accounts Payable
231
Salaries Payable
250
Unearned Revenue
261
Income Taxes Payable
EQUITY
311
Common Stock
331
Retained Earnings
REVENUE
411
Sales Revenue
EXPENSES
500
Cost of Goods Sold
511
Insurance Expense
512
Utilities Expense
521
Salaries Expense
532
Bad Debt Expense
540
Interest Expense
541
Depreciation Expense
559
Miscellaneous Expenses
910
Income Tax Expense
a. The company estimates that the building has a remaining life of 10 years (for a total of 16 years).
Prepare the necessary entry on December 31 to record depreciation for 2017.
GENERAL JOURNAL
DATE ACCOUNT TITLE POST. REF. DEBIT CREDIT
1
2
b. The company changes to the sum-of-the-years'-digits method.
Prepare the necessary entry on December 31 to record depreciation for 2017. Additional Instruction
GENERAL JOURNAL
DATE ACCOUNT TITLE POST. REF. DEBIT CREDIT
1
2
c. The company discovers that it had ignored the estimated residual value in the computation of the annual depreciation each year.
Prepare the necessary entries to correct the prior period error and record depreciation for 2017 on December 31.
GENERAL JOURNAL
DATE ACCOUNT TITLE POST. REF. DEBIT CREDIT
1
2
3
4
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started
Introduction To Management Accounting A User Perspective
Authors: Michael L Werner, Kumen H Jones
2nd Edition
0130327506, 9780130327505
