In January 2017 installation costs of 5100 on new machinery

In January 2017, installation costs of $5,100 on new machinery were charged to Maintenance and Repairs Expense. Other costs of this machinery of $25,500 were correctly recorded and have been depreciated using the straight-line method with an estimated life of 10 years and no salvage value. At December 31, 2018, it is decided that the machinery has a remaining useful life of 20 years, starting with January 1, 2018. What entries should be made in 2018 to correctly record transactions related to machinery, assuming the machinery has no salvage value? The books have not been closed for 2018 and depreciation expense has not yet been recorded for 2018. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select \"No entry\" for the account titles and enter 0 for the amounts.) Date Account Titles and Explanation Debit Credit Dec. 31 To correct for the error of expensing installation costs on machinery acquired in January, 2017) (To record depreciation on machinery for 2018 based on a 20-year useful life)

Solution

Answers

A

Cost of machinery

$        25,500.00

B

Repairs Expenses that should have been capitalized

$          5,100.00

C=A+B

Total CORRECT cost on Jan 2017

$        30,600.00

D

Earlier estimated life

10

E=C/D

Annual Depreciation for 2017 – CORRECT figure

$          3,060.00

F

Cost actually capitalized

$        25,500.00

G

Earlier estimated life

10

H=F/G

Error: Actual depreciation expense for 2017

$          2,550.00

I = E - H

Additional depreciation expense for 2017 that was not recorded in 2017

$              510.00

Working #2

Expense wrongly recorded

$          5,100.00

Additional depreciation expense for 2017 that was not recorded

$            (510.00)

Retained Earnings to be CREDITED (DEBITED) by due to error

$          4,590.00

Working #3

A

Total Actual cost

$               30,600.00

B

2017 correct depreciation expense

$                 3,060.00

C=A-B

Book value at the time of revision of estimates

$               27,540.00

D

Remaining Useful Life from 2018

20

E=C/D

New 2018 Depreciation expense

$                 1,377.00

Date

Accounts titles & Explanations

Debit

Credit

Working

Dec-31

Equipment (Machinery)

$                               5,100.00

[Cost debited now that was earlier not debited]

Accumulated Depreciation - Equipment (Machinery)

$                     510.00

Working #1

Retained Earnings

$                 4,590.00

Working #2

(entry to correct the error)

Dec-31

Depreciation Expense - Equipment (Machinery)

$                               1,377.00

Working #3

Accumulated Depreciation - Equipment (Machinery)

$                 1,377.00

(depreciation expense for 2018)

A	Cost of machinery	$        25,500.00
B	Repairs Expenses that should have been capitalized	$          5,100.00
C=A+B	Total CORRECT cost on Jan 2017	$        30,600.00
D	Earlier estimated life	10
E=C/D	Annual Depreciation for 2017 – CORRECT figure	$          3,060.00
F	Cost actually capitalized	$        25,500.00
G	Earlier estimated life	10
H=F/G	Error: Actual depreciation expense for 2017	$          2,550.00
I = E - H	Additional depreciation expense for 2017 that was not recorded in 2017	$              510.00