Reference no: EM135842
During 2011 and 2012, Faulkner Manufacturing used the sum-of-the-years-digits (SYD) technique of depreciation for its depreciable assets, for both tax purposes and financial reporting. At the starting of 2013, Faulkner decided to change to the straight-line method for both tax purposes and financial reporting. A tax rate of 40 percent is in effect for all years.
For an asset that cost $21,000 with an estimated residual value of $1,000 and an estimated useful life of 10 years, the depreciation under different methods is as given:
Year Straight Line SYD Difference
2011 $2,000 $3,636 $1,636
2012 2,000 3,273 1,273
$4,000 $6,909 $2,909
1. Prepare the journal entry that Faulkner may record in 2013 related to the change. (If no entry is needed for a particular event, select "No journal entry required" in the first account field.)
2. Consider instead that Faulkner previously used straight-line depreciation and changed to sum-of-the-years- digits in 2013. Purpose the journal entry that Faulkner will record in 2013 related to the change.
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