Exercise 11-13 Sunland Company constructed a building at a cost of $2,596,000 an

Question

Exercise 11-13 Sunland Company constructed a building at a cost of $2,596,000 and occupied it beginning in January 1998. It was estimated at that time that its life would be 40 years, with no salvage value. In January 2018, a new roof was installed at a cost of $354,000, 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 $188,800. What amount of depreciation should have been charged annually from the years 1998 to 2017? (Assume straight-line depreciation.) Depreciation from the years 1998 to 2017 SHOW LIST OF ACCOUNTS LINK TO TEXT LINK TO TEXT What entry should be made in 2018 to record the replacement of the roof? (If no entry is required, select "No entry" for the account titles and enter O for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit (To record the disposition of the old roof.)

Explanation / Answer

ans)

1. Amount of deprecistion charged annually from the years 1998 to 2017 is

2596000 / 40 = 64900

2. Entry to record replacement of roof

Loss on disposal of plant assets 94400

Accumulated depreciation - building (188800/40 X 20) 94400   

Building 188,800

Building 354000

Cash 354000

3) Entry to record the revision in estimated life of the building:

No entry

4) Amount of depreciation charged for year 2018:

Building ( 2596000 -188800 + 354000) = 2761200

Accumulated depreciation ( 64900 X 20 - 94400) = (1203600)

1557600

Remaining useful life 25

Depreciation for 2018 (1557600 / 25) 62304

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