Answer:
Entries need for recording depreciation given the change in estimation is:
Dr Depreciation expenses 4,592
Cr Accumulated depreciation 4,592
( to record depreciation expenses in the year of 2021, given depreciation estimate changes)
Explanation:
Relating to the change in depreciation estimate, the firm will not have to book any adjustment in previous depreciation expenses which is based on the old estimate, instead it will have to re-calculate depreciation expenses given the new estimate which are shown as below:
The net book value as at the beginning of 2021 is:
Purchase price - accumulate depreciation over 5 year
in which: purchase price = $67,200
accumulated depreciation over 5 year = depreciation expenses per yer x 5 = ( 67,200 - 4,480) /8 * 5 = $39,200
Thus, net book value at the beginning of 2021 is $28,000 which will be used to determine depreciation expense per year for the remaining 5 years of useful life, calculated as:
Depreciation per year: (28,000 - 5,040)/5 = $4,592.
