Question

In 1993, Crane Company completed the construction of a building at a cost of $2,020,000 and first occupied it in January 1994. It was estimated that the building will have a useful life of 40 years and a salvage value of $60,000 at the end of that time.

Early in 2004, an addition to the building was constructed at a cost of $505,000. At that time, it was estimated that the remaining life of the building would be, as originally estimated, an additional 30 years, and that the addition would have a life of 30 years and a salvage value of $20,200.

In 2022, it is determined that the probable life of the building and addition will extend to the end of 2053, or 20 years beyond the original estimate.

Compute the annual depreciation to be charged, beginning with 2022. (Round answer to 0 decimal places, e.g. 45,892.)

Answer 1

Annual depreciation to be charged, beginning with 2022	24435
Workings:
Cost	2020000
Less: Salvage value	60000
Depreciable cost	1960000
Useful life	40
Annual depreciation from 1994 through 2003	49000
Cost	2020000
Add: Additions	505000
Total cost	2525000
Less: Accumulated depreciation from 1994 through 2003	490000	=49000*10
Book value, Jan 2004	2035000
Less: Salvage value	80200	=60000+20200
Depreciable cost	1954800
Useful life	30
Annual depreciation from 2004 through 2021	65160
Book value, Jan 2004	2035000
Less: Accumulated depreciation from 2004 through 2021	1172880	=65160*18
Book value, Jan 2022	862120
Less: Salvage value	80200	=60000+20200
Depreciable cost	781920
Remaining Useful life	32	=12+20
Annual depreciation expense—building	24435