During 2022 and 2023, Faulkner Manufacturing used the sum-of-the-years'-digits (SYD) method of depreciation for its...
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Accounting
During 2022 and 2023, 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 2024, Faulkner decided to change to the straight-line method for both financial reporting and tax purposes. A tax rate of 25% 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 method is as follows:
Year
Straight-line
SYD
Difference
2022
$1,600
$2,909
$1,309
2023
1,600
2,618
1,018
$3,200
$5,527
$2,327
Required:
1. Prepare the journal entry that Faulkner will record in 2024 related to the change.
2. Suppose instead that Faulkner previously used straight-line depreciation and changed to sum-of-the-years'-digits in 2024. Prepare the journal entry that Faulkner will record in 2024 related to the change.
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