Machinery purchased for $41,200 by Happy Corp. on January 1, 2012, was originally estimated to have an 8-year useful life with a residual value of $6,000. Depreciation has been entered for five years on this basis. In 2017, it is determined that the total estimated useful life (including 2017) should have been 10 years, with a residual value of $7,000 at the end of that time. Assume straight-line depreciation and that Happy Corp. uses IFRS for financial statement purposes.1.Prepare the entry that is required to correct the prior years’ depreciation, if any.2.Prepare the entry to record depreciation for 2017.3.Repeat part (b) assuming Happy Corp. uses ASPE and the machinery is originally estimated to have a physical life of 8.5 years and a salvage value of $0. In 2017 it is determined that the total estimated physical life (including 2017) should have been 11 years, with a salvage value of $400 at the end of that time4.Repeat part (b) assuming Happy Corp. uses the double-declining-balance method of depreciation.
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