ACC 311 ch 4 ppt

Dateofchangeinestimate 500000 10years 50000

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Unformatted text preview: r $510,000 which was estimated to have a useful life of 10 years with a salvage value of $10,000 at the end of that time. Depreciation has been recorded for 7 years on a straight­line basis. In 2005 (year 8), it is determined that the total estimated life should be 15 years with a salvage value of $5,000 at the end of that time. Questions: What is the journal entry to correct the prior years’ depreciation? N No Calculate the depreciation expense for 2005.o Entry Required Required Chapter 4-26 Change in Estimate Example Change in Estimate Example Equipment cost Salvage value Depreciable base Useful life (original) Annual depreciation Fixed Assets: After 7 years $510,000 First, establish NBV at First, establish NBV at ­ 10,000 date of change in estimate. date of change in estimate. 500,000 10 years $ 50,000 x 7 years = $350,000 Balance Sheet (Dec. 31, 2004) Equipment Accumulated depreciation Net book value (NBV) Chapter 4-27 $510,000 350,000 $160,000 Change in Estimate Example Change in Estimate Example Net book value Salvage value (new) Depreciable base Useful life remaining Annual depreciation $160,000 5,000 155,000 8 years $ 19,375 After 7 years Depreciation Expense Depreciation Expense calculation for 2005. calculation for 2005. Journal entry for 2005 Depreciation expense Accumulated depreciation Chapter 4-28 19,375 19,375 Reporting Irregular Items Reporting Irregular Items Corrections of Errors Result from: mathematical mistakes mistakes in application of accounting principles oversight or misuse of facts Corrections treated as prior period adjustments Adjustment to the beginning balance of retained earnings Chapter 4-29 Reporting Irregular Items Reporting Irregular Items Corrections of Errors: To illustrate, in 2013, Hillsboro Co. determined that it incorrectly overstated its accounts receivable and sales revenue by $100,000 in 2010. In 2013, Hillboro makes the following entry to correct for this error (ignore income taxes). Retained earnings Accounts receivable Chapter 4-30 100,000 100,000 Intraperiod Tax Allocation Intraperiod Tax Allocation Relates the income tax expense to the specific items that give rise to the amount of the tax expense. Income tax is allocated to the following items: (1) Income fro...
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This note was uploaded on 02/01/2014 for the course ACC 311 taught by Professor Professorchandra during the Fall '13 term at SUNY Albany.

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