Exercise 11-12 In 1990, Nash Company completed the construction of a building at
ID: 2526362 • Letter: E
Question
Exercise 11-12 In 1990, Nash Company completed the construction of a building at a cost of $2,260,000 and first occupied it in January 1991. It was estimated that the building will have a useful life of 40 years and a salvage value of $67,800 at the end of that time. Early in 2001, an addition to the building was constructed at a cost of $565,000. 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 $22,600 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. Using the straight-line method, compute the annual depreciation that would have been charged from 1991 through 2000 Annual depreciation from 1991 through 2000 / yr SHOW LIST OF ACCOUNTS LINK TO TEXT LINK TO TEXT Compute the annual depreciation that would have been charged from 2001 through 2018. Annual depreciation from 2001 through 2018 yr SHOW LIST OF ACCOUNTS LINK TO TEXT LINK TO TEXTExplanation / Answer
(a)Using the straight line method, compute the annual depreciation that would have been charged from 1991 to 2000
Depreciation = ($2260000 - $67800 ) / 40 = $54,805
(b)The annual depreciation that would have been charged from 2001 through 2018 is $70,305
From 1990 – 2001
Depreciation = ($2260000 - $67800 ) / 40 = $54,805
From 2002 – 2018
Depreciation = ($565000 - $22600 ) / 30 = $18080
Annual depreciation that would have been charged from 2001 through 2018
= $54805 + $18080
= $72,885
(c)Prepare the entry, if necessary, to adjust the account balances because of the revision of the estimated life in 2019
“No Entry” is required
(d)Compute the annual depreciation to be charged, beginning with 2019 = $27,332
Years depreciated 28
Cost 2260000
Depreciation 1534540
Book Value 725460
Salvage Value 67800
Depreciable Value 657660
Remaining useful life 32 Years
Annual Depreciation $20,552
(ADDITION) 18 Years
Cost $565000
Depreciation $325440
Book Value 239560
Salvage Value 22600
Depreciable Amt 216960
Depreciation $6,780
“Annual Depreciation Expense – Building = $20,552 + $6,780 = $27,332”
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