In 1985, Abraham Company completed the construction of a building at a cost of $1,900,000 and first

Question:

In 1985, Abraham Company completed the construction of a building at a cost of $1,900,000 and first occupied it in January 1986. It was estimated that the building will have a useful life of 40 years and a of $60,000 at the end of that time.
Early in 1996, an addition to the building was constructed at a cost of $470,000. 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 of $20,000.
In 2014, it is determined that the probable life of the building and addition will extend to the end of 2045 or 20 years beyond the original estimate.
Instructions
(a) Using the straight-line method, compute the annual depreciation that would have been charged from 1986 through 1995.
(b) Compute the annual depreciation that would have been charged from 1996 through 2013.
(c) Prepare the entry, if necessary, to adjust the account balances because of the revision of the estimated life in 2014.
(d) Compute the annual depreciation to be charged beginning with 2014.

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...