Problem 1

During 2018, Lyda Bakery Inc.' s controller asked you to prepare any 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.

Problem 2

In 2018, Vega Corporation and Sarkissian Company engaged in the following exchange of assets:

1.) Vega gave up a small widget cutter with a cost of $40,000 and accumulated depreciation of $28,000 to acquire a deluxe widget cutter from Sarkissian Company. The deluxe widget cutter cost Sarkissian $100,000, has a book value of $25,000, and a fair value of $9,000. Vega also paid Sarkissian $2,000 cash.

2.) Vega acquired a delivery truck from Sarkissian in exchange for a packaging machine. The machine cost $60,000, has a book value of $12,000, and a fair value of $18,000. The truck has a cost of $24,000 and a book value of $16,000 on Sarkissian's books. Sarkissian also paid Vega $1,000.

Required: Make the entries to record the two exchanges of assets. You may assume that both transactions have commercial substance.