Machinery purchased for $56,000 by Wong Corp. on January 1, 2012, was originally estimated to have an
Question:
Machinery purchased for $56,000 by Wong Corp. on January 1, 2012, was originally estimated to have an eight-year useful life with a residual value of $4,000. Depreciation has been entered for five years on this basis. In 2017, it is determined that the total estimated useful life (including 2017) should have been 10 years, with a residual value of $4,500 at the end of that time. Assume straight-line depreciation and that Wong Corp. uses IFRS for financial statement purposes.
Instructions
(a) Prepare the entry that is required to correct the prior years' depreciation, if any.
(b) Prepare the entry to record depreciation for 2017.
(c) Repeat part (a) assuming Wong Corp. uses ASPE and the machinery is originally estimated to have a physical life of 8.5 years and a salvage value of $0. In 2017 it is determined that the total estimated physical life (including 2017) should have been 11 years, with a residual value of $100 at the end of that time. Round to the nearest dollar.
(d) Repeat part (b) assuming Wong Corp. uses the double-declining-balance method of depreciation.
Salvage ValueSalvage 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...
Step by Step Answer:
a No correcting entry is necessary because changes in estimate are handled in the current and prospe...View the full answer
Intermediate Accounting
ISBN: 978-1119048534
11th Canadian edition Volume 1
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Nicola M. Young, Irene M. Wiecek, Bruce J. McConomy
