Question

In 1993, Splish Company completed the construction of a building at a cost of $2,480,000 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 $75,200 at the end of that time. Early in 2004, an addition to the building was constructed at a cost of $620,000. 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 $24,800. 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. Using the straight-line method, compute the annual depreciation that would have been charged from 1994 through 2003. Annual depreciation from 1994 through 2003 $ /yr. e Textbook and Media List of Accounts Compute the annual depreciation that would have been charged from 2004 through 2022. Annual depreciation from 2004 through 2021 $ lyr.

Answer 1

Cost of the building = $2,480,000 Useful life = 40 years Annual depreciation = (Cost-Salvage value)/Useful life Annual depreciation = ($2,480,000-$75,200)/40 Annual depreciation = $2,404,800/40 Annual depreciation = $60,120 Annual depreciation from 1994 through 2003: $60,120 /yr. Annual depreciation for addition = ($620,000-$24,800)30 Annual depreciation for addition = $19,840 Total annual depreciation = $19,840 + $60,120 Total annual depreciation = $79,960 Annual depreciation from 2004 through 2021: $79,960 /yr.