The journal entries relating to the building for the fifth year is: Debit Depreciation expense $10,500; Credit Accumulated depreciation $10,500.
<h3>Journal entries</h3>
1. Dec 31
Debit Depreciation expense $10,500
Credit Accumulated depreciation $10,500
(To record depreciation expense )
Book value=$148,000-($148,000-$8,000/10×4)]
Book value=$148,000-$56,000
Book value=$92,000
Depreciation=$92,000-$8,000/8
Depreciation=$10,500
2. Dec 31
Debit Depreciation expense $24,000
Credit Accumulated depreciation $24,000
[($92,000-$8,000)×6/21]
(To record depreciation expense)
3. Dec 31
Debit Accumulated depreciation $3,200.00
[($8,000×4)/10]
Credit Retained earnings $3,200.00
(To record prior year adjustment for depreciation expense)
Dec 31
Debit Depreciation expense $10,000.00
Credit Accumulated depreciation $10,000.00
[($148,000-$8,000)/10]
(To record depreciation expense)
Therefore the journal entries relating to the building for the fifth year is: Debit Depreciation expense $10,500; Credit Accumulated depreciation $10,500.
The complete question is:
Bailand Company purchased a building for $148,000 that had an estimated residual value of $8,000 and an estimated service life of 10 years. Bailand purchased the building 4 years ago and has used straight-line depreciation. At the beginning of the fifth year (before it records depreciation expense for the year), the following independent situations occur:
1. Bailand estimates that the asset has 8 years’ life remaining (for a total of 12 years).
2. Bailand changes to the sum-of-the-years’-digits method.
3. Bailand discovers that the estimated residual value has been ignored in the computation of depreciation expense.
Required: For each of the independent situations, prepare all the journal entries relating to the building for the fifth year. Ignore income taxes.
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