Question

ACCT 201 Chapter 3 Practice Problems 2 1. On June 1, 2015. Total Sports Inc. acquired a building for SSGO.000. The estimated useful le of the asset is 12 years. Residual or salvage value at the end of 12 years is estimated to be $400,000. Total Sport Inc, records depreciation once per year on Dec. 31. Using straight line method 1. Calculate the depreciation expense per year 2. Calculate the depreciation expense per month 3. Make the journal entry to record depreciation expense for 2015 Date Account Debit Credit 4. Make the journal entry to record depreciation for 2016 Date Account Debit Credit 5. Calculate the balance in Accumulated Depreciation after 3 years 6. Calculate the book value after 3 years

Answer 1

Part 1
Depreciation as per Straight-Line method =(Cost of the Asset - Salvage value) / Life of the Asset
Depreciation expenses per year =($5,980,000 - $400,000) / 12 Years =$465,000
Part 2
Depreciation expenses per month =$465,000 / 12 months =$38,750
Part 3
Date	Account	Debit	Credit
Dec 31, 2015	Depreciation expenses-Building	$232,500
	Accumulated Depreciation-Building		$232,500
	(depreciation expense charged for 6 months
	of 2015)
Part 4
Date	Account	Debit	Credit
Dec 31, 2016	Depreciation expenses-Building	$465,000
	Accumulated Depreciation-Building		$465,000
	(depreciation expenses charged for 2016)
Part 5
Accumulated Depreciation balance after 3 Years from the date of purchase =$465,000*3 =$1,395,000
Part 6
Book Value after 3 Years =$5,980,000 - $1,395,000 =$4,585,000