Change in principle; change in depreciation methods
Response to the following problem:
For financial reporting, Clinton Poultry Farms has used the declining-balance method of depreciation for conveyor equipment acquired at the beginning of 2013 for $2,560,000. Its useful life was estimated to be six years, with a $160,000 residual value. At the beginning of 2016, Clinton decides to change to the straight-line method. The effect of this change on depreciation for each year is as follows:
|
|
($ in 000s): |
|
Year
|
Straight Line
|
Declining Balance
|
Difference
|
|
2013
|
$ 400
|
$ 853
|
$453
|
|
2014
|
400
|
569
|
169
|
|
2015
|
400
|
379
|
(21)
|
|
|
$1,200
|
$1,801
|
$601
|
Required:
1. Briefly describe the way Clinton should report this accounting change in the 2014-2016 comparative financial statements.
2. Prepare any 2016 journal entry related to the change.