Khim Inc. acquired the following assets in January 2008:
Equipment: estimated service life, 5 years; residual value, $15,000 .. $465,000
Building: estimated service life, 30 years; no residual value ..... $780,000
The equipment was depreciated using the double-declining-balance method for the first three years for financial reporting purposes. In 2011, the company decided to change the method of calculating depreciation to the straight-line method for the equipment because of a change in the pattern of benefits received, but no change was made in the estimated service life or residual value. It was also decided to change the building’s total estimated service life from 30 years to 40 years, with no change in the estimated residual value. The building is depreciated on the straight-line method.
Instructions
(a) Prepare the journal entry to record depreciation expense for the equipment in 2011. (Ignore tax effects and round to the nearest dollar.)
(b) Prepare the journal entry to record the depreciation expense for the building in 2011. (Ignore tax effects and round to the nearest dollar.)