Question

In January 2017, installation costs of \(6,000 on new machinery were charged to Maintenance and Repairs Expense. Other costs of this machinery of \)30,000 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 entry(ies) 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.

Short answer

The depreciation expense is $1,620, and the entries for depreciation and the correction of error are recorded.

Step-by-step solution

Calculation of depreciation

Book value (30,000-3,000) +(6,000-600)	32,400
Useful life	20 years
Depreciation expense (32400/20)	1,620

Journal Entry

Date	Particulars	Debit ($)	Credit ($)
Dec 31	Machinery	6,000
	Retained earnings (6000/10) *9		5,400
	Accumulated depreciation		600
	(being the correction of an error recorded)
Dec 31	Depreciation expense	1,620
	Accumulated depreciation		1,620
	(being depreciation expense recorded)