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Irwin, Inc., constructed a machine at a total cost of $45 million. Construction was completed at...

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Accounting

Irwin, Inc., constructed a machine at a total cost of $45million. Construction was completed at the end of 2014 and themachine was placed in service at the beginning of 2015. The machinewas being depreciated over a 10-year life using thesum-of-the-years’-digits method. The residual value is expected tobe $1 million. At the beginning of 2018, Irwin decided to change tothe straight-line method.

Ignoring income taxes, prepare the journal entry relating to themachine for 2018. (If no entry is required for atransaction/event, select "No journal entry required" in the firstaccount field. Enter your answers in millions rounded to 1 decimalplace (i.e., 5,500,000 should be entered as 5.5).)
  

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Transaction Accounts Title and Explanation Debit Credit
($ in million) ($ in million)
1 Depreciation Expense                     3.2
Accumulated Depreciation                     3.2
(Being depreciation recorded for 2018)
Workings:
Total cost of Machine = 45 million
Less: Accumulated Depreciation till date as per sum of years digits method = 21.6 million
Remaining Value = 23.4 million
Less: Residual Value = 1 million
Amount to be depreciated = 22.4 million
Remaining useful life = 7 years
Depreciation as per Straight line method = 3.2 million
Accumulated Depreciation till date as per sum of years digits method
{(10 + 9 + 8) / [(10 X(10+1) /2]} X [ $45 million - $1 million]
[(27) / (55)] X ($44 million) = $21.6 million

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