Question: At the beginning of 2017 Holden Company s controller asked you

At the beginning of 2017, Holden Company’s controller asked you to prepare correcting entries for the following three situations:
1. Machine X was purchased for $100,000 on January 1, 2012. Straight-line depreciation has been recorded for 5 years, and the Accumulated Depreciation account has a balance of $45,000. The estimated residual value remains at $10,000, but the service life is now estimated to be 1 year longer than originally estimated.
2. Machine Y was purchased for $40,000 on January 1, 2015. It had an estimated residual value of $4,000 and an estimated service life of 8 years. It has been depreciated under the sum-of-the-years’-digits method for 2 years. Now, the company has decided to change to the straight-line method.
3. Machine Z was purchased for $80,000 on January 1, 2016. Double-declining-balance depreciation has been recorded for 1 year. The estimated residual value is $8,000 and the estimated service life is 5 years. The computation of the depreciation erroneously included the estimated residual value.
Prepare any necessary correcting journal entries for each situation. Also prepare the journal entry for each situation to record the depreciation for 2017. Ignore income taxes.

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  • CreatedOctober 05, 2015
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