Exercise 11-12

In 1990, Cullumber Company completed the construction of a building at a cost of $2,160,000 and first occupied it in January 1991. It was estimated that the building will have a useful life of 40 years and a salvage value of $64,800 at the end of that time. Early in 2001, an addition to the building was constructed at a cost of $540,000. 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 $21,600. In 2019, it is determined that the probable life of the building and addition will extend to the end of 2050, or 20 years beyond the original estimate.

Part A: Using the straight-line method, compute the annual depreciation that would have been charged from 1991 through 2000.

Annual depreciation from 1991 through 2000: $______ / yr

Part B: Compute the annual depreciation that would have been charged from 2001 through 2018.

Annual depreciation from 2001 through 2018: $_______/ yr

Part C: Prepare the entry, if necessary, to adjust the account balances because of the revision of the estimated life in 2019.

Part D: Compute the annual depreciation to be charged, beginning with 2019.