Alteran Corporation purchased a machine for 1.5 million in 2006. The machine is being depreciated over a 10-year life using the sum-of-the-years'-digits method. The residual value is expected to be $300,000. At the beginning of 2009, Alteran decided to change to the straight-line depreciation method for this machine.
Prepare the 2009 depreciation adjusting entry.
where is the answer
where is the answer??
To prepare the 2009 depreciation adjusting entry, we need to determine the accumulated depreciation using the sum-of-the-years'-digits (SYD) method for the years 2006 to 2008. Then we need to calculate the depreciation expense for the year 2009 using the straight-line method. Finally, we can record the adjusting entry for the depreciation expense for 2009.
Step 1: Calculate accumulated depreciation using the SYD method for the years 2006 to 2008
The SYD method involves summing up the digits of the years remaining in the asset's useful life. In this case, the machine has a useful life of 10 years, and we are calculating the depreciation up to the end of 2008 (3 years).
The sum of the years' digits is calculated using the formula:
n(n + 1) / 2,
where n is the useful life of the asset.
For the machine with a useful life of 10 years, the sum of the years' digits is:
10(10 + 1) / 2 = 55.
Next, we calculate the depreciation expense for each year using the SYD method:
Year 2006:
Depreciation Expense = (Years Remaining / Sum of the Years' Digits) x (Cost - Residual Value)
Depreciation Expense = (10 / 55) x ($1,500,000 - $300,000) = $240,000
Year 2007:
Depreciation Expense = (9 / 55) x ($1,500,000 - $300,000) = $216,000
Year 2008:
Depreciation Expense = (8 / 55) x ($1,500,000 - $300,000) = $192,000
Step 2: Calculate the depreciation expense for 2009 using the straight-line method
The straight-line depreciation method allocates an equal amount of depreciation expense over the useful life of an asset.
Depreciation Expense = (Cost - Residual Value) / Useful Life
Depreciation Expense = ($1,500,000 - $300,000) / 10 = $120,000
Step 3: Record the 2009 depreciation adjusting entry
To record the adjusting entry, we debit the Depreciation Expense account for $120,000 and credit the Accumulated Depreciation account with the same amount. This entry recognizes the depreciation expense for the year and updates the accumulated depreciation to reflect the change to the straight-line method.
Adjusting Entry:
Debit Depreciation Expense - 2009 $120,000
Credit Accumulated Depreciation $120,000
Please note that this answer assumes a calendar year-end and that no other adjustments are needed. It's always a good idea to consult with an accountant or financial professional to ensure accuracy for specific scenarios.