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24 February, 20:43

On January 1, 2019, Al's Sporting Goods purchased store fixtures at a cost of $180,000. The anticipated service life was 10 years with no residual value. Al's has been using the double-declining-balance method, but in 2021 adopted the straight-line method because the company believes it provides a better measure of income. Al's has a December 31 year-end. The journal entry to record depreciation for 2021 is:

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  1. 24 February, 22:17
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    The journal entry is shown below:

    Explanation:

    The journal entry is as follows for recording the depreciation:

    Depreciation expense A/c ... Dr $ 14,400

    Accumulated depreciation ... Cr $ 14,400

    Working Note:

    Depreciation rate = 100 % / Number of years of life

    = 100 % / 10 years

    = 10%

    This will be multiplied by 2

    = 10% * 2

    Depreciation rate = 20%

    Using the double declining method:

    In year 2019

    Depreciation expense = Cost of purchasing * Depreciation rate

    = $180,000 * 20%

    = $36,000

    In year 2020

    Depreciation expense = (Cost of purchasing - Depreciation expense of last year) * Depreciation rate

    = ($180,000 - $36,000) * 20%

    = $144,000 * 20%

    = $28,800

    Using the Straight Line method:

    In the year 2021

    Depreciation expense = (Cost of purchasing - Depreciation expense of 2 years) / Number of years of useful life

    = ($180,000 - $64,800) / 8

    = $115,200 / 8

    = $14,400
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