Nelson Equipment Manufacturers, Inc. (NEM) reported the net book value of a plant asset at $2,622,000...

 

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Nelson Equipment Manufacturers, Inc. (NEM) reported the net book value of a plant asset at $2,622,000 on January 1 of the current year. There is a $510,000 expected residual value, and the estimated useful life is 25 years. On January 1 of the current year, following 10 full years of depreciation, the company determined that the asset will be useful for only another 10 years and reduced the expected residual value to $180,000. The change in estimate is needed to reflect extended usage and running the factory above normal capacity to meet increased demand. NEM uses the straight-line method of depreciation. The company is subject to a 40% tax rate. Read the requirements. Requirement a. Determine the original cost of NEM's plant asset. The original cost of NEM's plant asset is $ Requirement b. Compute the annual depreciation expense for the first 10 years of the asset's life. The annual depreciation for the first 10 years of the asset's life is $ Requirement c. Prepare the journal entry to record the change in the estimate. (Record debits first, then credits. Exclude explanations from any journal entries.) December 31, Current Year Account Nelson Equipment Manufacturers, Inc. (NEM) reported the net book value of a plant asset at $2,622,000 on January 1 of the current year. There is a $510,000 expected residual value, and the estimated useful life is 25 years. On January 1 of the current year, following 10 full years of depreciation, the company determined that the asset will be useful for only another 10 years and reduced the expected residual value to $180,000. The change in estimate is needed to reflect extended usage and running the factory above normal capacity to meet increased demand. NEM uses the straight-line method of depreciation. The company is subject to a 40% tax rate. Read the requirements. Requirement a. Determine the original cost of NEM's plant asset. The original cost of NEM's plant asset is $ Requirement b. Compute the annual depreciation expense for the first 10 years of the asset's life. The annual depreciation for the first 10 years of the asset's life is $ Requirement c. Prepare the journal entry to record the change in the estimate. (Record debits first, then credits. Exclude explanations from any journal entries.) December 31, Current Year Account

Answer rating: 100% (QA)

a Estimated useful life 25 years Therefore Depreciation rate 125 004 The plant asset h... View the full answer