Jerry Grant, the new controller of Blackburn Company, has reviewed the expected

Question

Jerry Grant, the new controller of Blackburn Company, has reviewed the expected useful lives and salvage values of selected depreciable assets at the beginning of 2010. His findings are as follows.


Type of Date cost Accumulated Useful Life Salvage Value
Asset Acquired Depreciation in years
1/1/10 old proposed
Old Proposed

Building 1/1/04 $819,200 $117,510 40 50 $35,800 $83,226

Warehouse 1/1/05 113,040 21,666 25 20 4,710 16,954

All assets are depreciated by the straight-line method. Blackburn Company uses a calendar year in preparing annual financial statements. After discussion, management has agreed to accept Jerry's proposed changes.

Compute the revised annual depreciation on each asset in 2010. (Round answers to 0 decimal places, e.g. 125.)
Building $________
Warehouse $_________

Prepare the entry (or entries) to record depreciation on the building in 2010. (Round answers to 0 decimal places, e.g. 125.)

Date Account/Description Debit Credit
Dec. 31 _______________
_______________

Explanation / Answer

Building 1/1/04 $800,000 $114,000 40 50 $40,000 $37,000 The carrying value at Jan 1, 2010 was $686,000, and the bldg is now 6 yrs old. New useful life is 50 yrs, so there are 44 more yrs to go. New salvage value is $37,000, so revised annual depreciation is ($686,000 - $37,000)/44 = $14,750. Warehouse 1/1/05 100,000 25,000 25 20 5,000 3,600 The carrying value at Jan 1, 2010 was $75,000, and the warehouse is now 5 yrs old. New useful life is 20 yrs, so there are 15 more yrs to go. New salvage value is $3,600, so revised annual depreciation is ($75,000 - $3,600)/15 = $4,760

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