Question

*Exercise 11-12 In 1990, Riverbed Company completed the construction of a building at a cost of $2,040,000 and first occupied it in January 1991. It was estimated that the building will have a useful life of 40 years and a salvage value of $61,200 at the end of that time Early in 2001, an addition to the building was constructed at a cost of $510,000. 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 $20,400. In 2019, it is determined that the probable life of the building and addition will extend to the end of 2050, or 20 years beyond the original estimate. Using the straight-line method, compute the annual depreciation that would have been charged from 1991 through 2000. Annual depreciation from 1991 through 2000 $ yr. Compute the annual depreciation that would have been charged from 2001 through 2018. Annual depreciation from 2001 through 2018 $ yr. Prepare the entry, if necessary, to adjust the account balances because of the revision of the estimated life in 2019. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Credit Debit Compute the annual depreciation to be charged, beginning with 2019. (Round answer to 0 decimal places, e.g. 45,892.) Annual depreciation expense--building $

Answer 1

1
Cost	2040000
Less: Salvage value	61200
Depreciable cost	1978800
Useful life	40
Annual depreciation from 1991 through 2000	49470	/yr.
2
Cost	2040000
Add: Additions	510000
Total cost	2550000
Less: Accumulated depreciation from 1991 through 2000	494700	=49470*10
Book value, Jan 2001	2055300
Less: Salvage value	81600	=61200+20400
Depreciable cost	1973700
Useful life	30
Annual depreciation from 2001 through 2018	65790	/yr.
3
No entry is required because of the revision of the estimated life in 2019
No entry                       0
No entry                            0
4
Book value, Jan 2001	2055300
Less: Accumulated depreciation from 2001 through 2018	1184220	=65790*18
Book value, Jan 2019	871080
Less: Salvage value	81600	=61200+20400
Depreciable cost	789480
Useful life	32	=50-18
Annual depreciation expense—building	24671