Question

Exercise 22-12 Your answer is partially correct. Try again On January 1, 2014, Cheyenne Company purchased a building and equipment that have the following useful lives, salvage values, and costs Building, 40-year estimated useful life, $50,400 salvage value, 1868,400 cost Equipment. 12-year estimated useful life, $10,000 salvage value, $100,000 cost The building has been depreciated under the double-declining balance method through 2017. In 2015, the company decided to switch to the straightine method of depreciation Cheyenne also decided to change the total useful fe of the equilament to 9 years, with a salvage value of $5,200 at the end of that time. The equipment is depreciated using the straight- method (a) Prepare the jumal entry necessary to record the depreciation expense on the building in 2018. (Round answers to decimal places, 125. Cred account des are automatically indented when amount is entered. Do not indent manually. If he entry is required lect "No Entry for the account tites and enter for the amount.) Account Tities and Explanation Depreciation Expense Taccumulated Depreciation-Building decimal places, 125.) (b) Comoute depreciation expense on the equipment for 2018. (Round answers to 2018 Depreciation expense

Answer 1

Ans: Building depreciation rate= 100*2/40

= 5%

S.n	Account title and explanation	Debit($)	Credit($)
	Depreciation expense	18,248
	Accumulated depreciation Building		18,248
	(being depreciation expense recorded)

Working note:

Year	Book Vale beginning of the year	Depreciation rate	Months 1/2	Annual depreciation expense	End of year accumulated depreciation	Book Value
2014	868,400	5%	1	43,420	43,420	824,980
2015	824,980	5%	1	41,249	84,669	783,731
2016	783,731	5%	1	39,187	123,856	744,544
2017	744,544	5%	1	37,227	161,083	707,317

Depreciation for 2018 according to straight line:

Particulars	Amount($)
Book value	707,317
Less: salvage value	(50,400)
Depreciable basis	656,917
Divided by:36 years	/36
2018 depreciation	18248