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During 2016 and 2017, Faulkner Manufacturing used the sum-of-the-years-digits (SYD) method of depreciation for its...

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Accounting

During 2016 and 2017, Faulkner Manufacturing used the sum-of-the-years-digits (SYD) method of depreciation for its depreciable assets, for both financial reporting and tax purposes. At the beginning of 2018, Faulkner decided to change to the straight-line method for both financial reporting and tax purposes. A tax rate of 40% is in effect for all years. For an asset that cost $17,200 with an estimated residual value of $1,200 and an estimated useful life of 10 years, the depreciation under different methods is as follows:

Year Straight Line SYD Difference 2016 $ 1,600 $ 2,909 $ 1,309 2017 1,600 2,618 1,018 $ 3,200 $ 5,527 $ 2,327

Required: 1. Prepare the journal entry that Faulkner will record in 2018 related to the change. 2. Suppose instead that Faulkner previously used straight-line depreciation and changed to sum-of-the-years- digits in 2018. Prepare the journal entry that Faulkner will record in 2018 related to the change.

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