Question

Question 2

Steve Grant, the new controller of Bonita Ltd., has reviewed the expected useful lives and residual values of selected depreciable assets at the beginning of 2017. His findings are as follows.

		Date				Accumulated Depreciation		Useful life in Years				Residual Value
Type of Asset		Acquired		Cost		1/1/17		Old		Proposed		Old		Proposed
Building		1/1/07		£810,900		£191,500		40		50		£44,900		£45,400
Warehouse		1/1/12		106,000		19,340		25		20		9,300		17,660

All assets are depreciated by the straight-line method. Bonita uses a calendar year in preparing annual financial statements. After discussion, management has agreed to accept Grant’s proposed changes.

Compute the revised annual depreciation on each asset in 2017.

		Building		Warehouse
Revised annual depreciation		£		£

Prepare the entry (or entries) to record depreciation on the building in 2017. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date	Account Titles and Explanation	Debit	Credit
Dec. 31

Answer 1

Computation of Revised Depreciaton

Revised Deprecation for Building = (810900-45400)/(50-10)= 19137.50

Revised Depreciation on Warehouse = (106000-17660)/(20-5)= $5889

Date	Account Tittle	Debit	Credit
31-Dec	Depreciaton on Building	$19,137.50
	Accumualted Depreciaiton- Buliding		$19,137.50
31-Dec	Depreciaton on Warehouse	$5,889.00
	Accumualted Depreciaiton- Warehouse		$5,889.00

Answer 2

Revised Depreciation for Building

Cost	810900
Less: Accumulated Depreciation	-191500
Book Value	619400
Less: Salvage Value (Proposed)	-45400
Depreciable Cost	574000

Proposed Useful Life	50
Used Life	(2017-2007)=10
Revised Annual Depreciation	14350

Revised Annual Depreciation = 574000/40 = 14350

Revised Depreciation for Warehouse

Cost	106000
Less: Accumulated Depreciation	-19340
Book Value	86660
Less: Salvage Value (Proposed)	17660
Depreciable Cost	69000

Proposed Useful Life	20
Used Life	-5
Revised Annual Depreciation	15

Revised Annual Depreciation = 69000/15 = 4600

Answer 3

Steve Grant, the new controller of Bramble Ltd., has reviewed the expected useful lives and residual values of selected depreciable assets at the beginning of 2020. His findings are as follows.

		Date				Accumulated Depreciation		Total Useful life in Years				Residual Value
Type of Asset		Acquired		Cost		1/1/20		Old		Proposed		Old		Proposed
Building		1/1/10		£804,000		£191,000		40		50		£40,000		£53,000
Warehouse		1/1/15		114,000		21,880		25		20		4,600		29,120