Reference no: EM132764441
Question - Kenth Company is in the process of preparing its financial statements for 2020. Assume that no entries for depreciation have been recorded in 2020. The following information related to depreciation of fixed assets is provided to you.
1. Kenth purchased equipment on January 2, 2017, for $85,000. At that time, the equipment had an estimated useful life of 10 years with a $5,000 residual value. The equipment is depreciated on a straight-line basis. On January 2, 2020, as a result of additional information, the company determined that the equipment has a remaining useful life of four years with a $3,000 residual value.
2. During 2020, Kenth changed from the double-declining-balance method for its building to the straight-line method. The building originally cost $300,000. It had a useful life of 10 years and a residual value of $30,000. The following calculations present depreciation on both bases for 2018 and 2019.
Straight-Line Double-Declining-Balance
2018 $27,000 $60,000
2019 27,000 48,000
3. Kenth purchased a machine on July 1, 2018, at a cost of $120,000. The machine has a residual value of $16,000 and a useful life of eight years. Kenth's bookkeeper recorded straight-line depreciation in 2018 and 2019 but failed to consider the residual value.
Required - Prepare the journal entries to record depreciation expense for 2020 and correct any errors made to date related to the information provided. (Ignore income tax considerations.)
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