Will Smith, the new controller of Fresh Prince Company, has reviewed the expected useful lives and salvage values of selected depreciable assets at the beginning of 2007. Here are his findings:
Accumulated Useful Life
Type of Date Depreciation, (in years) Salvage Value
Asset Acquired Cost Jan. 1, 2007 Old Proposed Old Proposed
Building Jan. 1, 1999 $900,000 $172,000 40 50 $40,000 $47,600
Warehouse Jan. 1, 2001 120,000 27,600 25 20 5,000 3,600
Determine straight-line depreciation
All assets are depreciated by the straight-line method. Fresh Prince Company uses a calendar year in preparing annual financial statements. After discussion, management has agreed to accept Will’s proposed changes. (The “Proposed” useful life is total life, not remaining life.)
Instructions
(a) Compute the revised annual depreciation on each asset in 2007. (Show computations.)
(b) Prepare the entry (or entries) to record depreciation on the building in 2007.