Question

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*

Answer 1

Answer

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

Answer 2