Response to the following problem:
The following Equipment and Accumulated Depreciation accounts appear in the general ledger of the Sadler Corporation at December 31, 2016.
GENERAL LEDGER
Equipment Acct. No. 183
|
Date
2014
|
|
Description
|
Folio
|
Debit
|
Credit
|
|
Balance
|
|
Aug.
|
1
|
Purchase
|
G17
|
15,000
|
|
DR
|
15,000
|
|
|
|
|
|
|
|
|
|
Accumulated Depreciation - Equipment Acct. No. 193
|
Date
2016
|
|
Description
|
Folio
|
Debit
|
Credit
|
|
Balance
|
|
|
|
Balance forward
|
|
|
|
CR
|
2,250
|
|
|
31
|
Depreciation 2016
|
G19
|
|
1,500
|
CR
|
3,750
|
The company uses the ½ year rule to calculate depreciation expense in the years of acquisition and disposal. At the time of purchase, the equipment had an estimated useful life of ten years with no residual value. The straight-line method of depreciation is used. On January 1, 2017, it was estimated that the equipment would last only four more years (to December 31, 2020).
Required:
1. Calculate the depreciation expense for 2017.
2. Prepare the journal entry to record 2017 depreciation expense.
3. Post the accumulated depreciation part of the entry in 2 above to the general ledger and calculate the new balance in the account.
4. How much should the depreciation amount have been in each year if the actual four-year useful life of the equipment had been known in 2016?
5. Given the substantial difference between the depreciation amounts in 2016 and 2017, is the information conveyed to the reader of Sadler Corporation's 2017 financial statements reasonable?