P22-1 (Change in Estimate and Error Correction) Holtzman Company is in the process of preparing its financial statements for 2014. Assume that no entries for depreciation have been recorded in 2014. The following information related to depreciation of fixed assets is provided to you.
1. Holtzman purchased equipment on Jan 2, 2011, for				$85,000	At the time, the equipment
had an estimated useful life of		10	years with a	$5,000	salvage value. The equipment
is depreciated on a straight-line basis. On January 2, 2014, as a result of additional information, the
company determined that the equipment has a remaining useful life of					4	years with a
$3,000	salvage value.
During 2014, Holtzman changed from the double-declining balance method for its building to the
straight-line method. The building originally cost				$300,000	It had a useful life of
10	years and a salvage value of			$30,000	The following computations
present depreciation on both bases for 2012 and 2013.
			2013	2012
	Straight-line		$27,000	$27,000
	Declining balance		$48,000	$60,000
3. Holtzman purchased a machine on July 1, 2012, at a cost of					$120,000	The machine
has a salvage value of		$16,000	and a useful life of		8	years.
Holtzmans bookkeeper recorded straight-line depreciation in 2012 and 2013 but failed to consider the salvage value.
Instructions:
(a) Prepare the journal entries to record depreciation expense for 2014 and correct any errors made to date related to the information provided.
(1)	Cost of equipment			Amount
	Less: Salvage value			Amount
	Depreciable cost			Formula
	Depreciation to 2014
	2011	Amount	Number	Formula
	2012	Amount	Number	Formula
	2013	Amount	Number	Formula
				Formula
	Depreciation in 2014
	Cost of equipment			Amount
	Less: Depreciation to 2014			Amount
	Book value, January 1, 2014			Formula
	Less: Salvage value			Amount
	Depreciable cost			Formula
	Remaining years			Number
	Depreciation in 2014			Formula
	Account title				Amount
	Account title					Amount
(2)	Cost of building			Amount
	Less: Depreciation to 2014
	2012			Amount
	2013			Amount
	Book value, January 1, 2014			Formula
	Less: Salvage value			Amount
	Depreciable cost			Formula
	Remaining years			Number
	Depreciation in 2014			Formula
	Account title				Amount
	Account title					Amount
(3)	Account title				Amount
	Account title					Amount
	Account title				Amount
	Account title					Amount
	Depreciation recorded in 2012: [$120,000 8 * (1/2)]				Amount
	Depreciation that should be recorded in 2012: [($120,000 $16,000) 8 * (1/2)]				Amount
	Depreciation recorded in 2013: ($120,000 / 8)				Amount
	Depreciation that should be recorded in 2013: [($120,000 $16,000) 8]				Amount
		Depreciation taken	Depreciation that should be taken	Differences
	2012	Amount	Amount	Formula
	2013	Amount	Amount	Formula
		Formula	Formula	Formula
(b) Show comparative net income for 2013 and 2014. Income before depreciation expense was
$300,000	in 2014, and was		$310,000	in 2013. Ignore taxes.
HOLTZMAN COMPANY
Comparative Income Statements
For the Years 2014 and 2013
					2014	2013
Income before depreciation expense					Amount	Amount
Depreciation Expense					Amount	Amount
Net income					Formula	Formula
Depreciation Expense					2014	2013
Equipment					Amount	Amount
Building					Amount	Amount
Machine					Amount	Amount
					Formula	Formula