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On 1st January 2014, a company purchased Machinery for $200,000. Depreciation was charged under the straight-line method 10% p.a. At the end of 2016, the company has decided to change the depreciation method straight line to diminishing balance 15% p.a. effective from the very beginning. The accounts are closed on 31 December each year.
Required: Machinery account from 2014 to 2016​

Sagot :

Parrain

The machinery account from 2014 to 2016 based on the straight-line and diminishing balance methods will look like:

                                              Machinery a/c

1/1/14   Bank                        $200,000 12/31/14 Depreciation       $20,000

                                                                            Balance c/d         $180,000

                                           $200,000                                            $200,000

1/1/15   Balance b/d           $180,000 12/31/15 Depreciation        $20,000

                                                                            Balance c/d         $160,000

                                           $180,000                                              $180,000

1/1/16   Balance b/d      $160,000  12/31/16  Depreciation             $20,000

                                                                       Income Statement -  $17,175

                                                                       Depreciation

                                                                       adjustment

                                                                       Balance c/d             $122,825

                                           $160,000                                            $160,000

What is the machinery account balance for the three years?

The depreciation for 2014 and 2015 is:

= 200,000 x 10%

= $20,000

In 2016, the depreciation changes to diminishing balance. The income adjustment will be:

= Balance in 2016 using straight-line - Balance using diminishing balance

= 140,000 - 122,825

= $17,175

Find out more on accounting for depreciation at https://brainly.com/question/25785586.

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