Question 1: Wardell Company purchased a minicomputer on January 1, 2009, at a cost of 440,000. The computer was depreciated using the straight-line method over an estimated five-year life with an estimated residual value of $4,000. On January 1, 2011, the estimate of useful life was changed to a total of 10 years, and the estimate of residual value was changed to $900.
Required
1. Prepare the appropriate adjusting entry for depreciation in 2011 to reflect the revised estimate
Question 2:
($ in 000s)
Year Straight line Declining Balance Difference
2008 $ 400 $ 853 $453
2009 $ 400 $ 569 $ 169
2010 $ 400 $379 $ (21)
$1,200 $1,801 $601
a. For financial reporting, Clinton Poultry Farm has used the declining balance method of depreciation for conveyor equipment acquired at the beginning 2008 for $2,560,000. Its useful life was estimaterd to be six years, with a $160,000 residual balance. At the beginning of 2011, Clinton decides to change to the straight line method. The effect of this change on depreciation for each year is as follows:
Required
1. Briefly describe the way Clinton should report this accounting change in 2010-2011 comparative financial statements.
2. Prepare 2011 journal entry related to change