Type of Date Accumulated Depreciation, Useful Life (in years) Salvage Value Asse
ID: 2452207 • Letter: T
Question
Type of
Date
Accumulated
Depreciation,
Useful Life (in years)
Salvage Value
Asset
Acquired
Cost
Jan. 1, 2014
Old
Proposed
Old
Proposed
Building
Warehouse
Prepare the entry (or entries) to record depreciation on the building in 2014. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Account Titles and Explanation
Debit
Credit
Danny Venable, the new controller of Seratelli Company, has reviewed the expected useful lives and salvage values of selected depreciable assets at the beginning of 2014. Here are his findings:Type of
Date
Accumulated
Depreciation,
Useful Life (in years)
Salvage Value
Asset
Acquired
Cost
Jan. 1, 2014
Old
Proposed
Old
Proposed
Building Jan. 1, 2006 $792,400 $146,956 40 48 $57,620 $36,470 Warehouse Jan. 1, 2009 151,700 29,420 25 20 4,600 4,530All assets are depreciated by the straight-line method. Seratelli Company uses a calendar year in preparing annual financial statements. After discussion, management has agreed to accept Danny’s proposed changes. (The “Proposed” useful life is total life, not remaining life.)
Explanation / Answer
Building :
Book value of building as on Jan 1, 2014 = 792400-146956 = $645444
Eight years have been depreciated. So with the new useful life and the new salvage value, the new depreciation per year is :
(645444-36470)/40 = 15224
Dr....Dep Exp-Building $15224
Cr...Accumulated Dep-Building $15224
Warehouse :
Book value of building as on Jan 1, 2014 = 151700-29420 = $122280
Five years have been depreciated. So with the new useful life and the new salvage value, the new depreciation per year is :
(122280-4530)/15 = $7850
Dr....Dep Exp-Warehouse $7850
Cr...Accumulated Dep-Warehouse $7850
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