In 1993, Sheffield Company completed the construction of a building at a
cost of $2,340,000 and first occupied it in January 1994. It was
estimated that the building will have a useful life of 40 years and a
salvage value of $69,600 at the end of that time.
Early in 2004, an
addition to the building was constructed at a cost of $585,000. At that
time, it was estimated that the remaining life of the building would be,
as originally estimated, an additional 30 years, and that the addition
would have a life of 30 years and a salvage value of $23,400.
In 2022, it is determined that the probable life of the building and addition will extend to the end of 2053, or 20 years beyond the original estimate.
*Please help! Part (d) didn't accept $23,547 or $1,204,800 as the answer for the annual depreciation expense-building*
1 | ||
Cost | 2340000 | |
Less: Salvage value | 69600 | |
Depreciable cost | 2270400 | |
Useful life | 40 | |
Annual depreciation from 1994 through 2003 | 56760 | / yr. |
2 | ||
Cost | 2340000 | |
Add: Additions | 585000 | |
Total cost | 2925000 | |
Less: Accumulated depreciation from 1994 through 2003 | 567600 | =56760*10 |
Book value, Jan 2004 | 2357400 | |
Less: Salvage value | 93000 | =69600+23400 |
Depreciable cost | 2264400 | |
Useful life | 30 | |
Annual depreciation from 2004 through 2021 | 75480 | / yr. |
3 | ||
No entry is required because of the revision of the estimated life in 2022 | ||
Account Titles and Explanation | Debit | Credit |
No entry | 0 | |
No entry | 0 | |
4 Windsor Company acquired a plant asset at the beginning of Year 1......................................
Life of asset is 5 years
Therefore, Depreciation rate will be 1 / 5 = 20%
Therefore, in double declining method, depreciation rate will be 2 x 20% = 40%
Depreciation amount in Year 1 under double declining method is given as 23,200
Therefore, cost of asset = 23200 / 40% = 58,000
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