Prepare the method of depreciation for depreciable assets

Assignment Help Accounting Basics

Reference no: EM131884841

Question: During 2014 and 2015, Faulkner Manufacturing used the sum-of-the-years'-digits (SYD) method of depreciation for its depreciable assets, for both financial reporting and tax purposes. At the beginning of 2016, Faulkner decided to change to the straight-line method for both financial reporting and tax purposes. A tax rate of 40% is in effect for all years.

For an asset that cost $15,100 with an estimated residual value of $1,100 and an estimated useful life of 10 years, the depreciation under different methods is as follows:

Year	Straight Line	SYD	Difference
2014	$1,400	$2,545	$1,145
2015	1,400	2,291	891
	$2,800	$4,836	$2,036

Required: 1. Prepare the journal entry that Faulkner will record in 2016 related to the change. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

2. Suppose instead that Faulkner previously used straight-line depreciation and changed to sum-of-the-years'- digits in 2016. Prepare the journal entry that Faulkner will record in 2016 related to the change.(If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Reference no: EM131884841

Questions Cloud

Provide possible ways to structure the classroom setting : Provide a minimum of three possible ways to structure the classroom setting. Provide a minimum of two possible ways to structure a class period

Review stockholders equity section of the balance sheet : During 2014, Toney Corporation held a portfolio of available-for-sale securities having a cost of $221,700. There were no purchases or sales of investments.

Determine the tentative minimum tax base : Determine Gold Corporation's AMTI for 2015. Determine the tentative minimum tax base.

Compute the residual income for the division : For 2014, the New Products Division, of Testar Company, had operating income of $10,000,000 and operating assets of $46,800,000.

Prepare the method of depreciation for depreciable assets : During 2014 and 2015, Faulkner Manufacturing used the sum-of-the-years'-digits (SYD) method of depreciation for its depreciable assets.

Determine the total deduction for the stolen items : Jacob is an employee and used the computer 100% of the time in his employment. Although his homeowner's insurance policy paid Jacob $7,000 for the stolen.

What did dangerous dragon inc record : In 2010, Dangerous Dragon, Inc. (a retail clothing company) sold 550,847 units of its product at an average price of $19 per unit.

What is the cash flow to stockholders : The 2014 balance sheet of Creation Paints Incorporated showed $550,000 in the common stock account and $3.5 million in the additional paid-in capital/surplus.

What is the raymond net investment income tax : During 2015, Raymond a single individual, earned a salary of $206,000. He also had the following items of investment income: $50,000 net short term capital gain

User Account

All Pages