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For financial reporting
For financial reporting. Clinton Poultry Farms has used the declining-balance method of depreciation for conveyor equipment acquired at the beginning of 2015 for 52704000. Its useful life was estimated to be six years with a 5196000 residual value. At the beginning of 2018. Clinton decides to change to the straight-line method. The effect of this change on depreciation for each year is as follows (S In 000s):
Year Straight-Line Declining Balance Difference 2015 5 428 5 901 5483 2016 428 601 183 2017 428 401 (17) $1,254 51,903 $649
Required: 2 Prepare any 2018 Journal entry related to the change. (Enter your answers in dollars rounded to the nearest thousand. If no entry Is required for a transaction/event, select "No Journal entry required" In the first account field.)
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Journal entry worksheet
Record the adjusting entry for depreciation in 2018.
Expert Solution
Computation of Annual Straight Line Depreciation:
Book Value at the Beginning of 2018 = Asset Cost - Accumulated Depreciation till 2017
= $2,704,000 - $1,983,000
= $721,000
Annual Straight Line Depreciation = (Book Value at the Beginning of 2018 - Salvage Value)/Remaining Estimated Life
= ($721,000 - $196,000)/(6-3)
= $525,000/3
Annual Straight Line Depreciation = $175,000
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