Question
Stacey Corp. has been depreciating equipment over a 10-year life on a straight-line basis. The equipment, which cost $24,000, was purchased on 1 January 20X1.
Stacey Corp. has been depreciating equipment over a 10-year life on a straight-line basis. The equipment, which cost $24,000, was purchased on 1 January 20X1. It has an estimated residual value of $6,000. On the basis of experience since acquisition, management has decided in 20X5 to depreciate it over a total life of 14 years instead of 10 years, with no change in the estimated residual value. The change is to be effective on 1 January 20X5. The 20X5 financial statements are prepared on a comparative basis; 20X4 and 20X5 incomes before depreciation were $49,800 and $52,800, respectively. Disregard income tax considerations.
Required: 1-a. Analyze the effects of the change. (Leave no cells blank - be certain to enter "0" wherever required. Amounts to be deducted should be indicated by a minus sign.)
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2. Prepare the entry, to appropriately reflect the 20X5 depreciation in the accounts for 20X5, the year of the change. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)
a. Record the depreciation at year-end, 20X5.
3. Show how the accounting change, the equipment, and the related depreciation should be reported on the 20X5 financial statements, including comparative 20X4 results.
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NOTE- PLEASE ATTEMPT THE QUESTION IF YOU CAN ANSWER ALL THE SUBPARTS FOR A POSITIVE RATING.
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