Joy Cunningham Co. purchased a machine on January 1, 2018, for $550,000. At that time, it was

Question:

Joy Cunningham Co. purchased a machine on January 1, 2018, for $550,000. At that time, it was estimated that the machine would have a 10-year life and no salvage value. On December 31, 2021, the firm’s accountant found that the entry for depreciation expense had been omitted in 2019. In addition, management has informed the accountant that the company plans to switch to straight-line depreciation, starting with the year 2021. At present, the company uses the sum-of-the-years’-digits method for depreciating equipment.

Instructions

Prepare the general journal entries that should be made at December 31, 2021, to record these events. (Ignore tax effects.)

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...