Answer:
Sheridan Co.
a. It is not necessary to correct the prior year's depreciation. Depreciation is an accounting estimate and does not require the adjustment of prior year's accounts when there is a correction in its estimates.
b. Entry to record depreciation for 2021:
Debit Depreciation Expense $4,387
Credit Accumulated Depreciation $4,387
To record the depreciation expense for the year.
Explanation:
a) Data and Calculations:
Purchase of machinery in 2016 = $64,200
Original estimated useful life = 8 years
Salvage value = $4,280
Depreciation amount = $59,920 ($64,200 - $4,280)
Depreciation expense per year = $7,490 ($59,920/8)
Accumulated depreciation for 5 years = $37,450
Net book value = $26,750 ($64,200 - $37,450)
Remaining estimated useful life = 5 years
Salvage value = $4,815
New depreciable amount = $21,935 ($26,750 - $4,815)
Depreciation expense per year = $4,387 ($21,935/5)
