Exercise 11-12 In 1987, Herman Moore Company completed the construction of a bui
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Exercise 11-12
In 1987, Herman Moore Company completed the construction of a building at a cost of $3,180,000 and first occupied it in January 1988. It was estimated that the building will have a useful life of 40 years and a salvage value of $95,400 at the end of that time.
Early in 1998, an addition to the building was constructed at a cost of $795,000. At that time, it was estimated that the remaining life of the building would be, as originally estimated, an additional 30 years, and that the addition would have a life of 30 years and a salvage value of $31,800.
In 2016, it is determined that the probable life of the building and addition will extend to the end of 2047, or 20 years beyond the original estimate.
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Exercise 11-12
In 1987, Herman Moore Company completed the construction of a building at a cost of $3,180,000 and first occupied it in January 1988. It was estimated that the building will have a useful life of 40 years and a salvage value of $95,400 at the end of that time.
Early in 1998, an addition to the building was constructed at a cost of $795,000. At that time, it was estimated that the remaining life of the building would be, as originally estimated, an additional 30 years, and that the addition would have a life of 30 years and a salvage value of $31,800.
In 2016, it is determined that the probable life of the building and addition will extend to the end of 2047, or 20 years beyond the original estimate.
Explanation / Answer
Annual depreciation from 1988 through 1997 Depreciation per year ( Cost- salvage / Life) (3180000-95400)/40 Annual depreciation from 1988 through 1997 $77,115 Total Depreciation for 10 years 77115*10 = $ 771150 Annual depreciation from 1998 through 2015 Total Cost Book Value 3180000-771150 2408850 Additional Cost 795000 Total 3203850 Depreciation ( 3203850-31800)/30 105735 Annual depreciation from 1998 through 2015 $105,735 For 18 years 105735*18 1903230 Book Value 3203850-1903230 1300620 Depreciation from 2016 ( 1300620-31800)/20 $63,441
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