U2 Problems - Described below are three independent and...

Info iconThis preview shows pages 1–3. Sign up to view the full content.

View Full Document Right Arrow Icon
Described below are three independent and unrelated situations involving accoutning changes Each change occurs during 2011 before any adjusting entries or closing entries are prepared. a. On December 30, 2007, Rival Industries acquired its office building at a cost of $10,000,000. It has been depreciated on a straight-line basis assuming a useful life of 40 years and no residual value. Early in 2011, the estimate of useful life was revised to 28 years in total with no change in residual value. b. At the beginin gof 2007, the Hoffman Group purchased office equipment at a cost of $330,000. Its useful life was estimated to be 10 years with no residual value. The equipment has been depreciated by the sum-of-the-years's-digits method. On January 1, 2011, the company changed to the straight-line method. c. At the beginning of 2011, Jantzen Specialties, which used the sum-of-the-years'-digits method, changed to the straight-line method for newly acquired buildings and equipment. The change increased current year net income by $445, 000. Required: For each situation: 1. Identify the type of change. 2. Prepare any journal entry necessary as a direct result of the change as well as any adjusting entry for 2011 related to the situation described.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
(Ignore income tax effects.) 3. Briefly describe any other steps that should be taken to appropriately report the situation. Depreciation per year = $10,000,000/40 years $250,000 per year Depreciation from Dec 30, 2007 till Dec 31, 2010 (early 2011) = $250,000 x 3 years = $750,000 Book value as of Early 2011 = $10,000,000 - $750,000 $9,250,000 Revised useful life = 28 years; Remaining useful life = 28 – 3 years elapsed = 25 years New depreciation expense = $9,250,000/25 years $370,000 per year 1. Type of change – Change in estimated useful life of asset resulting in change in depreciation expense - change in accounting estimate as a result of change in accounting principle. 2.
Background image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 02/29/2012 for the course INTERMEDIA 301 taught by Professor ?? during the Spring '12 term at Post.

Page1 / 8

U2 Problems - Described below are three independent and...

This preview shows document pages 1 - 3. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online