Exercise 11-12 In 1987, Herman Moore Company completed the construction of a bui

Question

Exercise 11-12 In 1987, Herman Moore Company completed the construction of a building at a cost of $4,700,000 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 $141,000 at the end of that time. Early in 1998, an addition to the building was constructed at a cost of $1,175,000. 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 $47,000. 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. Using the straight-line method, compute the annual depreciation that would have been charged from 1988 through 1997. (Round answer to 0 decimal places, e.g. 45,892.) Annual depreciation from 1988 through 1997 $ / yr Show List of Accounts Link to Text Compute the annual depreciation that would have been charged from 1998 through 2015. (Round answer to 0 decimal places, e.g. 45,892.) Annual depreciation from 1998 through 2015 $ / yr Show List of Accounts Link to Text Prepare the entry, if necessary, to adjust the account balances because of the revision of the estimated life in 2016. (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 Show List of Accounts Link to Text Compute the annual depreciation to be charged, beginning with 2016. (Round answer to 0 decimal places, e.g. 45,892.) Annual depreciation expense—building $

Explanation / Answer

Particulars Calculations First Occupancy Date January'1988 Cost of building A $4,700,000 Use ful life of the Building B 40 Years Salvage Value C $141,000 Addition to building in 1998 D $1,175,000 Salvage value of Addition E $47,000 Remaining life of the building in 1998 F 30 Years Probable life of the building in 2016 G 30 Years (10 years remaining as per previous estimated life + 20 years of additional life as envisaged) Annual Straight line depreciation starting 1988 thru 1997 H = (A-C)/B $113,975 Total Depreciation charged starting 1988 thru 1997 I = H*10 $1,139,750 Annual depreciation that can be charged from 1998 thru 2015 J = (A-C-I+D-E)/F $151,575 Total Depreciation charged starting 1998 thru 2015 K = J*18 $2,728,350 Annual depreciation that can be charged starting 2016 L = (A-C+D-E-I-K)/G $60,630

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