The Canliss Milling Company purchased machinery on January 2, 2022, for $800,000. A five-year life was estimated
Question:
The Canliss Milling Company purchased machinery on January 2, 2022, for $800,000. A five-year life was estimated and no residual value was anticipated. Canliss decided to use the straight-line depreciation method and recorded $160,000 in depreciation in 2022 and 2023. Early in 2024, the company changed its depreciation method to the sum-of-the-years’-digits (SYD) method.
Required:
1. Will Canliss apply the SYD method retrospectively or apply the method prospectively?
2. Prepare any 2024 journal entry related to the change.
Step by Step Answer:
1 Canliss applied the SYD method retrospectively 2 The journal entri...View the full answer
Related Video
In accounting terms, depreciation is defined as the reduction of the recorded cost of a fixed asset in a systematic manner until the value of the asset becomes zero or negligible. An example of fixed assets are buildings, furniture, office equipment, machinery, etc. The land is the only exception that cannot be depreciated as the value of land appreciates with time. Depreciation allows a portion of the cost of a fixed asset to be the revenue generated by the fixed asset. This is mandatory under the matching principle as revenues are recorded with their associated expenses in the accounting period when the asset is in use. This helps in getting a complete picture of the revenue
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