In 1993, Herman Moore Company completed the construction of a building at a cost of $2,000,000 and
Question:
In 1993, Herman Moore Company completed the construction of a building at a cost of $2,000,000 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 $60,000 at the end of that time.
Early in 2004, an addition to the building was constructed at a cost of $500,000. 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 $20,000.
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.
Instructions
a. Using the straight-line method, compute the annual depreciation that would have been charged from 1994 through 2003.
b. Compute the annual depreciation that would have been charged from 2004 through 2021.
c. Prepare the entry, if necessary, to adjust the account balances because of the revision of the estimated life in 2022.
d. Compute the annual depreciation to be charged, beginning with 2022.
Salvage ValueSalvage 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...
Step by Step Answer:
Intermediate Accounting
ISBN: 978-1119503668
17th edition
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfiel