Compute the amount of depreciation

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Reference no: EM132091413

Question: Analyzing and Recording Entries Related to a Change in Estimated Life and Residual Value Reader's Digest is a global publisher of magazines, books, and music and video collections, and is one of the world's leading direct-mail marketers. Many direct-mail marketers use high-speed Didde press equipment to print their advertisements. These presses can cost more than $1 million. Assume that Reader's Digest owns a Didde press acquired at an original cost of $600,000. It is being depreciated on a straight-line basis over a 20-year estimated useful life and has a $75,000 estimated residual value. At the end of 2009, the press had been depreciated for a full eight years. In January 2010, a decision was made, on the basis of improved maintenance procedures, that a total estimated useful life of 25 years and a residual value of $109,500 would be more realistic. The accounting period ends December 31.

Required: 1. Compute ( a) the amount of depreciation expense recorded in 2009, and ( b) the book value of the printing press at the end of 2009.

2. Compute the amount of depreciation that should be recorded in 2010. Show computations.

3. Give the adjusting entry for depreciation at December 31, 2010.

Reference no: EM132091413

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