Greg Maddox Company constructed a building at a cost of $ 3,300,000 and occupied
ID: 2483738 • Letter: G
Question
Greg Maddox Company constructed a building at a cost of $ 3,300,000 and occupied it beginning in January 1995. It was estimated at that time that its life would be 40 years, with no salvage value. In January 2015, a new roof was installed at a cost of $ 450,000 , and it was estimated then that the building would have a useful life of 25 years from that date. The cost of the old roof was $ 240,000 . What amount of depreciation should have been charged annually from the years 1995 to 2014? (Assume straight-line depreciation.) Depreciation from the years 1995 to 2014 $ What entry should be made in 2015 to record the replacement of the roof? (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) No. Account Titles and Explanation Debit Credit 1 (To record the disposition of the old roof.) 2 (To record the installation of the new roof.) Prepare the entry in January 2015 to record the revision in the estimated life of the building, if necessary. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit What amount of depreciation should be charged for the year 2015? Depreciation for the year 2015 (Assume the cost of the new roof is debited to accumulated depreciation - equipment) $ Depreciation for the year 2015 (Assume the cost of the old roof is removed) $
Explanation / Answer
Calculation of depreciation to be charged as per staright line method
Depreciation = (Cost of asset - Salvage value)/No. of years
= $3300000/40
= $82500
Journal Entry for replacement of Asset
Accumulated depreciation on old roof until 1 January 2015 = 240000/40 x 20 =$120000
Book value of roof = $120000
When a change in a useful life estimate occurs there is no need to make any journal entry thus no entry is required to be made for change in estimated life.
Account Titles and Explanations Debit($) Credit($) Accumulated Depreciation A/c Dr. $120000 Building A/c Dr $570000 To Buliding A/c $240000 To Cash A/c $450000Related Questions
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