Problem:
In the past, PERA COMPANY has depreciated its computer hardware using the straight-line method. The computer hardware has a 10% salvage value and an estimated useful life of 5 years. As a result of the rapid advancement in information technology, management of Pera has determined that it receives most of the benefits from its computer facilities in the first few years of ownership. Hence, as of January 1, 2012, Pera proposes changing to the sum-of-years-digits method for depreciating its computer hardware. The following computer purchases were made by Pera at the beginning of each year. 2009 P90,000 2010 50,000 2011 60,000
1. How much depreciation expense was recorded by Pera in 2009, 2010, and 2011?
2. The amount of depreciation expense that should be recognized in 2012 is?
3. What journal entry, if any, should be prepared on January 1, 2012, to adjust the accounts?
A. Retained earnings 32,400 Accumulated depreciation 32,400 B. Accumulated depreciation 32,400 Retained earnings 32,400 C. Depreciation expense 32,400 Accumulated depreciation 32,400 D. No entry is necessary