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Gerald Englehart Industries changed from the double-declining balance to the straight-line method in 2008 on all its

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Gerald Englehart Industries changed from the double-declining balance to the straight-line method in 2008 on all its plant assets. There was no change in the assets’ salvage values or useful lives. Plant assets, acquired on January 2, 2005, had an original cost of $1,600,000, with a $100,000 salvage value and an 8-year estimated useful life. Income before depreciation expense was $270,000 in 2007 and $300,000 in 2008.
Instructions
(a) Prepare the journal entry (ies) to record the change in depreciation method in 2008.
(b) Starting with income before depreciation expense, prepare the remaining portion of the income statement for 2007 and 2008.

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...
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a Cost of plant assets 1600000 Less Depreciation prior to 2008 2005 1600000 X 25 400000 200...View the full answer


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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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