On January 3, 2007, Sandy’s Fashions, a clothing chain selling moderately priced women’s clothing, purchased a large number of personal computers. The cost of these computers was $120,000. On the date of purchase, Sandy’s management estimated that the computers would last approximately five years and would have a salvage value at that time of $12,000.
The company used the double-declining-balance method to depreciate the computers. During January 2008, Sandy’s management realized that technological advancements had made the computers virtually obsolete and that they would have to be replaced. Management proposed changing the estimated useful life of the computers to two years.
Instructions:
Prepare the journal entry necessary at the end of 2008 to record depreciation on the computers.