At 30 June 2019, the financial statements of McMaster Ltd showed a building with a cost of

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At 30 June 2019, the financial statements of McMaster Ltd showed a building with a cost of $300 000 and accumulated depreciation of $152 000. The business uses the straight‐line method to depreciate the building. When acquired, the building’s useful life was estimated at 30 years and its residual value at $60 000. On 1 January 2020, McMaster Ltd made structural improvements to the building costing $94 000. Although the capacity of the building was unchanged, it is estimated that the improvements will extend the useful life of the building to 40 years, rather than the 30 years originally estimated. No change is expected in the residual value. Ignore GST.

Required

(a) Calculate the number of years the building had been depreciated to 30 June 2019.

(b) Give the general journal entry to record the cost of the structural improvements on 1 January 2020.

(c) Give the general journal entry to record the building’s depreciation expense for the year ended 30 June 2020.

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Financial Accounting

ISBN: 9780730363217

10th Edition

Authors: John Hoggett, John Medlin, Keryn Chalmers, Claire Beattie, Andreas Hellmann, Jodie Maxfield

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