Question

Exercise 8-15 Extraordinary repairs; plant asset age LO C3 Martinez Company owns a building that appears on its prior year-end balance sheet at its original $760,000 cost less $570,000 accumulated depreciation. The building is depreciated on a straight-line basis assuming a 20-year life and no salvage value. During the first week in January of the current calendar year, major structural repairs are completed on the building at a $76,000 cost. The repairs extend its useful life for 5 years beyond the 20 years originally estimated. 1. Determine the building's age (plant asset age) as of the prior year-end balance sheet date. 2. Prepare the entry to record the cost of the structural repairs that are paid in cash. 3. Determine the book value of the building immediately after the repairs are recorded. 4. Prepare the entry to record the current calendar year's depreciation. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Required 3 Required 4 Determine the building's age (plant asset age) as of the prior year-end balance sheet date Age of the building years Required 1 Required 2 >

15?

Answer 1

1) Annual Depreciation = 760000/20 = 38000 per year

Age of Building = 570000/38000 = 15 years

2) Journal entry

Date	account and explanation	Debit	Credit
	Building	76000
	Cash		76000
	(To record major repairs)

3) Revised book value

Cost of building (760000+76000)	836000
Less: Accumulated depreciation	-570000
Book value	266000

4) Adjusting entry

Date	account and explanation	Debit	Credit
Dec 31	Depreciation expense (266000/10)	26600
	Accumulated depreciation-Building		26600
	(To record Depreciation)