Will Smith, the new controller of Fresh Prince Company, hasreviewed the expected
ID: 2457734 • Letter: W
Question
Will Smith, the new controller of Fresh Prince Company, hasreviewed the expected useful lives and salvage values of selecteddepreciable assets at the beginning of 2007. Here are hisfindings:
SalvageValue
All assets are depreciated by the straight-line method. FreshPrince Company uses a calendar year in preparing annual financialstatements. After discussion, management has agreed to acceptWill's proposed changes. (The "Proposed" useful life is total life,not remaining life.)
Compute the revised annual depreciation on each asset in 2007.(Round to 0 decimal places.)
Building $
Warehouse $
Prepare the entry to record depreciation on the building in2007.
E9-4Explanation / Answer
A.
Assets
Cost
Accumulated Dep.
Book value on
Salvage value
Remianing life
1-Jan-07
1-Jan-07
proposed
Building
$900,000
$172,000
$728,000
$47,600
50 yr- 8yr. =42 yr.
Warehouse
$120,000
$27,600
$92,400
$3,600
50 yr - 6yr. = 44 yr.
Book value =
Cost - Acumulated Dep.
Revised Depreciation
Building
Depreciation =
$7,28,000 book value - $47,600 / 42 yearsremaining life
(future period)
=
$6,80,400 / 42
=
$16,200
Warehouse
Depreciation =
$92400 book vlue - $3600 salvage value / 44yearsremaining life
(future period)
=
$88800 / 44
=
$2,018
B.
Record Depreciation for 2007 on building
Dr.
Cr.
31-Dec-07
Depreciation
$16,200
Accumulateddep- building
$16,200
A.
Assets
Cost
Accumulated Dep.
Book value on
Salvage value
Remianing life
1-Jan-07
1-Jan-07
proposed
Building
$900,000
$172,000
$728,000
$47,600
50 yr- 8yr. =42 yr.
Warehouse
$120,000
$27,600
$92,400
$3,600
50 yr - 6yr. = 44 yr.
Book value =
Cost - Acumulated Dep.
Revised Depreciation
Building
Depreciation =
$7,28,000 book value - $47,600 / 42 yearsremaining life
(future period)
=
$6,80,400 / 42
=
$16,200
Warehouse
Depreciation =
$92400 book vlue - $3600 salvage value / 44yearsremaining life
(future period)
=
$88800 / 44
=
$2,018
B.
Record Depreciation for 2007 on building
Dr.
Cr.
31-Dec-07
Depreciation
$16,200
Accumulateddep- building
$16,200
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