Doug Smith Industries purchased warehouses for $55 million (no residual value) at the beginning of 2015. The warehouses were being depreciated over a 10-year life using the sum-of-the-years'-digits method. At the beginning of 2018, management decided to change to straight-line.
- Ignoring taxes, the 2018 adjusting entry will include a debit to depreciation expense of:

Question

Quizplus · Accepted Answer

Sum-of-the-years'-digits depreciation was $27 million {$55 million x [(10 + 9+ 8) / 55]}. Thus, the undepreciated value at the beginning of 2018 is $28 million ($55 million - 27 million), which will be depreciated over seven years.

Doug Smith Industries Purchased Warehouses for $55 Million (No Residual