Question
On January 1, 2021, The Burgundy Winery purchased a new vineyard. The vineyard purchase consisted of a building, a bottling machine, cellar equipment, and land.
On January 1, 2021, The Burgundy Winery purchased a new vineyard. The vineyard purchase consisted of a building, a bottling machine, cellar equipment, and land. The total purchase price was $5,250,000. The fair market value of each asset is as follows: the building, $1,800,000; the bottling machine, $1,200,000; the cellar equipment, $600,000; and the land, $2,400,000.
The building has a 10 year-life and a salvage value of $100,000. It is depreciated using the straight-line method.
Assuming use of the straight-line method, prepare revised depreciation calculations for the building if the useful life estimate was revised at the beginning of 2027, to anticipate a remaining useful life of 4 additional years (in other words, total life of 14 years). The revised useful life was accompanied by a change in estimated salvage value to $40,000.
Below is currently what I have come up with myself. I'm a little torn with the revised Annual Expense Calculation I came up with. Looking to see if I can have it looked over for any errors I may have done. Thank you.
| (e) Straight-line depreciation revised for the building | ||||||
| Year | Annual Expense | Accumulated Depreciation at End of Year | Annual Expense Calculation | |||
| 2021 | $ 170,000 | $ 170,000 | (1800000-100000)/10 = $170000 | |||
| 2022 | $ 170,000 | $ 340,000 | (1800000-100000)/10 = $170000 | |||
| 2023 | $ 170,000 | $ 510,000 | (1800000-100000)/10 = $170000 | |||
| 2024 | $ 170,000 | $ 680,000 | (1800000-100000)/10 = $170000 | |||
| 2025 | $ 170,000 | $ 850,000 | (1800000-100000)/10 = $170000 | |||
| 2026 | $ 170,000 | $ 1,020,000 | (1800000-100000)/10 = $170000 | |||
| 2027 | $ 105,714 | $ 914,286 | (1800000-1020000-40000)/7 = $105714.29 | |||
| 2028 | $105,714 | $808,572 | (1800000-1020000-40000)/7 = $105714.29 | |||
| 2029 | $105,714 | $702,858 | (1800000-1020000-40000)/7 = $105714.29 | |||
| 2030 | $105,714 | $597,144 | (1800000-1020000-40000)/7 = $105714.29 | |||
| 2031 | $105,714 | $491,430 | (1800000-1020000-40000)/7 = $105714.29 | |||
| 2032 | $105,714 | $480,856 | (1800000-1020000-40000)/7 = $105714.29 | |||
| 2033 | $105,714 | $375,142 | (1800000-1020000-40000)/7 = $105714.29 | |||
| 2034 | $105,714 | $269,428 | (1800000-1020000-40000)/7 = $105714.29 | |||
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Financial and Managerial Accounting the basis for business decisions
Authors: Jan Williams, Susan Haka, Mark Bettner, Joseph Carcello
16th edition
0077664078, 978-0077664077, 78111048, 978-0078111044
