Question

Peloton Company constructed a building at a cost of $2,400,000 and occupied it beginning in January 1996. It was estimated at that time that its life would be 40 years, with no residual value. In January 2016, a new roof was installed at a cost of $300,000, and it was estimated then that the building would have a useful life of 25 years from that date. The cost of the old roof was $180,000.

What amount of depreciation should have been charged annually from the years 1996 to 2015? (Assume straight-line depreciation.) Depreciation to be charged $ What entry should be made in 2016 to record the replacement of the roof?

(account Titles and Explanation Debit Credit (To record the disposition of the old roof) (To record the installation of the new roof) Prepare the entry in January 2016 to record the revision in the estimated life of the building, if necessary. (Credit account titles are automatically indented when the amount is entered.

) Account Titles and Explanation Debit Credit What amount of depreciation should be charged for the year 2016? Depreciation to be charged ?

Answer 1

The depreciation from 1996 to 2015 total 20 years @ 60000/- each year total depreciation we shall charged 1200000/-

And addition depreciation @ 12000 for 5 year total additional depreciation 60000/-

Total amount of depreciation is 1200000+60000 = 1260000/-

Entry for replacement in 2016 is as below

Building A/c Dr. 300000

To Bank S/c Cr. 300000

Loss on salvage of old roof Dr. 180000

To Building A/c Cr. 180000