Gracious Hospital purchased the following plant assets on January 1, 20X1:
Estimated Cost Salvage Value Useful Life (Years)
Land $ 100,000
Buildings 8,000,000
$1,600,000 40
Equipment 4,500,000 500,000 20
Required: (1) Assuming straight-line depreciation, what is the depreciation expense for 20X4? (2) At what amount, net of accumulated depreciation, would these assets be presented in the balance sheet of the hospital at December 31, 20X6?
(1) Calculations for The Depreciation Expense for 20X4 using Straight Line Depreciation:-
Straight Line Depreciation Method=(Cost of Assets - Salvage Value)/ Estimated Useful Life.
No Depreciation Expense Calculated for Land.
Buildings=($8,000,000-$1,600,000)/40 years
=($6,400,000/40)
=$160,000 annual Depreciation Expense for 20X4 for Buildings.
Equipment=($4,500,000-$500,000)/20 years
=($4,000,000/20)
=$200,000 Annual Depreciation Expense for 20X4 for Equipment.
(b) Calculations for net amount of Accumulated Depreciation presented in the Balance Sheet:-
Accumulated Depreciation for Buildings for 6 years (January 1,20X1 to December 31,20X6):-
Accumulated Depreciation, Buildings=(Annual Depreciation Expense × 6 years)
=($160,000 × 6 years)
=$960,000
So the Accumulated Depreciation on Buildings as on December 31,20X6 is $960,000.
Accumulated Depreciation for Equipment for 6 years (January 1,20X1 to December 31,20X6):-
Accumulated Depreciation for Equipment=(Annual Depreciation Expense × 6 years)
=($200,000×6)
=$1,200,000
So the Accumulated Depreciation on Equipment as on December 31,20X6 is $1,200,000.
Gracious Hospital
Balance Sheet (Partial)
December 31,20X6
Accounts | Amount | Amount |
---|---|---|
Assets:- | ||
Land | $100,000 | |
Buildings | $8,000,000 | |
Less:- Accumulated Depreciation, Buildings | ($960,000) | |
Buildings, net | $7,040,000 | |
Equipment | $4,500,000 | |
Less:- Accumulated Depreciation, Equipment | ($1,200,000) | |
Equipment, net | $3,300,000 | |
Gracious Hospital purchased the following plant assets on January 1, 20X1: Estimated Cost Salvage Value &n
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