Reference no: EM132574541

Question - Bailand Company purchased a building for $286,000 that had an estimated residual value of $6,000 and an estimated service life of 10 years. Bailand purchased the building 4 years ago and has used straight-line depreciation. At the beginning of the fifth year (before it records depreciation expense for the year), the following independent situations occur:

1. Bailand estimates that the asset has 8 years' life remaining (for a total of 12 years).

2. Bailand changes to the sum-of-the-years'-digits method. Prepare the journal entry on December 31 to record depreciation in the fifth year after the change in depreciation method.

3. Bailand discovers that the estimated residual value has been ignored in the computation of depreciation expense. Prepare the journal entries on December 31 to record the prior period adjustment for the error and depreciation in the fifth year. Ignore income taxes.