Practice Exercise 11-2 occupied it In 1990, Pharoah Company completed the constr

Question

Practice Exercise 11-2 occupied it In 1990, Pharoah Company completed the construction of a building at a cost of $840,000 and first occupied it in January 1991. It was estimated that the building would have a useful life of 40 years and a salvage value of $25,000 at the end of that time. Early in 2001, an addition to the building was constructed at a cost of $210,000. 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 $8,000. In 2019, it is determined that the probable life of the building and addition will extend to the end of 2050, or 20 years beyond the original estimate. the buiding and ade on nestmated, an adltiona, Early in 2001, an additios Using the straight-line method, compute the annual depreciation that would have been charged each year from 1991 through 2000. Annual depreciation from 1991 through 2000 yr Compute the annual depreciation that would have been charged from 2001 through 2018 Annual depreciation from 2001 through 2018 yr Prepare the entry, if necessary, to adjust the account balances because of the revision of the estimated life in 2019. (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

Explanation / Answer

Depreciation from 1991 to 2000
= (840000-25000)/40years = $20375 per year.

Depreciation from 2001 to 2018:
= (210000-8000)/30years + $20375 = $6733.33 + $20375 = $27108.33 per year

Depreciation from 2019:
Net carrying amount of asset = 840000+21000-(20375*10)-(27108.33*18)
=358300
Estimated remaining useful life = 32 years
Depreciation = (358300-25000-8000)/32years = $10165.625 per year

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