Sadler Corporation Purchased Equipment to Be Used in Manufacturing

Essay

Sadler Corporation purchased equipment to be used in manufacturing. The purchase was made at the beginning of 2013 by paying cash of $150,000. The equipment has an estimated residual value of 10,000 and an expected useful life of 10 years. At the beginning of 2015, Sadler concluded that the total useful life of the equipment will be 8 years rather than 10, and that the residual value will be zero. Sadler uses the straight-line method for depreciation.
Required:
A. Prepare the journal entry to record depreciation on the equipment for 2014.
B. Prepare the journal entry to record depreciation on the equipment for 2015, including the effect of the changes in estimates.
C. Describe how and when a business should account for a change in the estimated useful life and/or residual value of a depreciable asset.