Hancock Corporation is in the process of preparing its financial statements for 2013. Assume no entries for depreciation have been recorded in 2013. The following information related to depreciation of fixed assets is provided to you.
Hancock purchases equipment on 01/01/2010 for $85,000. At that time, the equipment had an estimated useful life of 10 years with a $5,000 salvage value. The equipment is depreciated on a straight-line basis. On 01/02/2013, as a result of additional information, the company determined that the equipment has a remaining life of 4 years with a $3,000 salvage value.
During 2013, Hancock changed from the double-declining balance method for its building to the straight-line method. The building originally cost $300,000. It had a useful life of 10 years and a salvage value of $30,000. The following computations represent depreciation under each method for 2011 and 2012...
- 2011 2012
- Straight-line $27,000 $27,000
- Declining Balance $60,000 $48,000
Hancock purchased a machine on July 1, 2011 at a cost of $120,000. The machine has a salvage value of $16,000 and a useful life of 8 years. Hancock's accountant recorded straight-line depreciation in 2011 and 2012 but failed to consider the salvage value.
Prepare the journal entries to record depreciation expense for 2013 and correct any errors. please show work to be rated.