Eddlebrock Manifolds, Inc. acquired the following assets in January 2018:
Manufacturing Equipment
Cost: $875,000, estimated service life 8 years; with $215,000 salvage value.
Building for a Warehouse and Shop
Cost: $2,458,750 estimated service life 25 years; no salvage value.
The equipment has been depreciated using the sum of the year’s digits method
for the first 3 years for financial reporting purposes. In 2021, the company
decided to change the method of computing depreciation to the straight-line
method for the equipment, but no change was made to the estimated service life
or salvage value.
The company also decided to change the estimated remaining service life of the
building to 20 years as of January 1, 2021, with estimated salvage value still zero.
The building has been depreciated on the straight-line method and this method
will continue to be used.
Required:
(a) Prepare the general journal entry to record depreciation expense for the
equipment in 2021.
(b) Prepare the journal entry to record depreciation expense for the building in
2021.