ACC 323
Ch 20: Change in Depreciation Estimates
Fun Company purchased equipment on 1/1/Y1 for $20,000. At that time, management estimated the
equipment would be useful for 10 years and have a residual value of $2,000. Fun Company uses straight
line to depreciate all of their PP&E. On 6/15/Y6 management changed the estimated total useful life of
this asset to 7 years and changed the estimated residual value to $1,000. Fun records depreciation at
the end of each month.
Calculate depreciation expense for this asset for Year 1.
Dep. Exp. ($20,000 - $2,000) / 10 years
$1,800
Prepare the regular year 1 end-of-month SL depreciation JE for this asset.
$1,800/12 months
$150/month
DR
Depreciation Expense
150
CR
Accumulated Depreciation
150
Calculate the book value of this asset at the point in time the change in estimates took effect.
11,000
Calculate depreciation expense for this asset for Year 6.
5,000
Prepare the AJE needed on 6/30/Y6 for this asset.
Prepare the new regular end-of-month SL depreciation JE for this asset beginning 7/31/Y6.
