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Question 1: A warehouse with a cost of $500,000 has an estimated residual value of $120,000, has an estimated useful life of 40 years, and
Question 1:
A warehouse with a cost of $500,000 has an estimated residual value of $120,000, has an estimated useful life of 40 years, and is depreciated by the straight-line method.
- Determine the amount of the annual depreciation.
- Determine the book value at the end of the twentieth year of use.
- Assuming that at the start of the twenty-first year the remaining life is estimated to be 25 years and the residual value is estimated to be $150,000, determine the depreciation expense for each of the remaining 25 years.
Question 2:
Equipment was acquired at the beginning of the year at a cost of $91,000. The equipment was depreciated using the straight-line method based on an estimated useful life of nine years and an estimated residual value of $10,000.
- What was the depreciation for the first year?
- Assuming the equipment was sold at the end of the second year for $78,000, determine the gain or loss on the sale of the equipment.
- Journalize the entry to record the sale.
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