Britten Inc. is a large European civil engineering and construction enterprise. They have just finished building, for their own use, a large hangar, which will serve as both a warehouse for their inventory of raw construction materials and as a garage for idle equipment between assignments. Construction began on 14 July X1 and was completed on 1 October of the same year. Resources consumed by the construction project were:
=> Raw materials which were already in inventory for an amount of 10,000 CU
=> Labor costs amounting to 20,000 CU. This type of light construction is generally depreciated over ten years and Britten Inc. chose to use the double declining balance method. The residual value of the building will be essentially zero. The hangar will be fully depreciated by:
=> Either switching to the straight-line method when the double-declining rate on the balance becomes smaller than the straight-line rate over the remaining years.
=> Or switching to straight-line method at the midpoint of useful life of the hangar.
The closing date is 31 December.
Required
1 Record the acquisition cost of the hangar (depreciable amount).
2 Prepare the depreciation schedule under both possibilities for switching to straight-line, assuming that the hangar will be fully depreciated at the end of year X10.
3 Record the depreciation expense pertaining to the hangar in the income statement of Britten Inc. for the year ended 31 December X1.