Question

Salim Construction Ltd. acquired the following property, plant and equipment on January 1, 2018: Residual Asset Cost Value Useful Life amortization method Office equipment $ 75,000 $5,000 5 years double-declining balance method Building 220,000 20,000 straight-line method Delivery equipment 250,000 10,000 units-of-production method The delivery equipment is estimated to be useful for 240,000 kilometers and was driven 30,000 kilometers during 2018 and 40 000 km during 2019 25 years 10 years REQUIRED: 1. Calculate amortization expense for 2018 and 2019 for each of the above assets, using the schedules provided 2. Journalize the amortization expense of each asset at December 31 of both years

Answer 1

	Cost	Residual Value	Useful Life	Depreciation formula	Depreciation 2018	Book Value at 2018	Depreciation 2019
Office Equipment	$          75,000	$                 5,000	5	2/5*Book Value	$                    30,000	$                    45,000	$                    18,000
Building	$        220,000	$              20,000	25	(220000-20000)/25	$                       8,000	$                  212,000	$                       8,000
Delivery Equipment	$        250,000	$              10,000	10	(220000-20000)/240000*Km driven	$                    25,000	$                  225,000	$                    33,333

Date	Account	Debit	Credit
Dec 2008	Depreciation	$              30,000
	Office Equipment		$     30,000
Dec 2008	Depreciation	$                 8,000
	Building		$       8,000
Dec 2008	Depreciation	$              25,000
	Delivery Equipment		$     25,000
Dec 2009	Depreciation	$              18,000
	Office Equipment		$     18,000
Dec 2009	Depreciation	$                 8,000
	Building		$       8,000
Dec 2009	Depreciation	$              33,333
	Delivery Equipment		$     33,333