Please answer both parts in red. Thank you ! Exercise 11-12 In 1990, Tamarisk Co

Question

Please answer both parts in red. Thank you !

Exercise 11-12 In 1990, Tamarisk Company completed the construction of a building at a cost of $2,500,000 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 $75,000 at the end of that time Early in 2001, an addition to the building was constructed at a cost of $625,000. 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 $25,000 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 Your answer is correct. Using the straight-line method, compute the annual depreciation that would have been charged from 1991 through 2000. Annual depreciation from 1991 through 2000 60625 yr SHOW LIST OF ACCOUNTS SHOW SOLUTION LINK TO TEXT LINK TO TEXT

Explanation / Answer

1. Annual depriciation = (Cost of asset - salvage value)/ total number of years

For the addition,

Annual depreciation = (625000-25000)/30 = 20000

But from 2001 to 2018, he will also pay the initial depreciation , hence annual depreciation = $60625+20000= 80625 $

2. From 2019, the life is estimated to be 20 yrs more. hence, for building life years = 40+20=60 and for the addition life years = 20+30 = 50

we compute the depreciation paid off so far and subtract it from book value.

18750

total depreciation = 75781+18750 = $ 94,531

Building Addition Book value 2500000 625000 salvage value 75000 25000 remaining useful life 32 32 Annual depreciation 75781.25

18750

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