A Large Lathe Was Bought on January 1, 2019 for $15,000,000

question 65

Essay

A large lathe was bought on January 1, 2019 for $15,000,000. It was expected to last for 12 years and have a residual value of $300,000. The company uses straight-line depreciation. At the beginning of 2024, the remaining useful life of the lathe was revised to be four more years (for nine years in total). Management also felt that all equipment should now be depreciated using the declining balance method at a 25% rate. The company has a December 31 year-end.
Required: Prepare the entries to record depreciation for 2019 and 2024.

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Definitions:

Kinetic

Pertaining to motion, objects being in motion or the study of dynamics that involve motion.

Linear Perspective

Linear perspective is a technique in art and photography that creates the illusion of depth and distance on a flat surface, by having parallel lines converge towards one or more vanishing points on the horizon.

Aerial Perspective

A visual technique in art used to create the illusion of depth by depicting objects in the distance with less clarity and a bluer tone than those in the foreground.

Motion Parallax

A depth cue that involves the difference in speed of movement of images across the retina as one moves through the environment.