Problem 1

During 2018, Lyda Bakery Inc.' s controller asked you to prepare required correcting entries for the following three situations and to record depreciation expense for 2018:

1.) A commercial oven was purchased for $100,000 on January 1, 2013. Straight-line depreciation has been recorded for five years, and the balance in the Accumulated Depreciation account has a balance of $50,000. The estimated salvage value is unchanged at $10,000, but the estimated useful life is now estimated to be one year longer than originally estimated.

 

2.) A commercial mixer was purchased for $80,000 on January 1, 2016. It had an estimated residual value of $10,000 and an estimated useful life of 10 years. It has been depreciated using the DDB method for 2 years. At the beginning of 2018, Lyda has decided to change to the straight-line method of depreciation for the mixer.

 

 

3.) A commercial slicing machine was purchased on January 1, 2017 for $40,000. It was estimated that the slicer's residual value is $4,000 and an estimated useful life of 5 years. DDB was used to record depreciation in 2017. In 2018 (after the books were closed for 2017) it was discovered that 2017 depreciation was computed using the estimated residual value.