In 1990, Sandhill Company completed the construction of a building at a cost of
ID: 2591751 • Letter: I
Question
In 1990, Sandhill Company completed the construction of a building at a cost of $920,000 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 $28,000 at the end of that time. Early in 2001, an addition to the building was constructed at a cost of $230,000. 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 $9,000. 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 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 SHOW LIST OF ACCOUNTS Compute the annual depreciation that would have been charged from 2001 through 2018 Annual depreciation from 2001 through 2018 s yrExplanation / Answer
Depreciation charged from 1991 through 2001 per year:
Depreciation from 2001 to 2018 will include depreciaion on original building plus depreciaion of additional construction
Depreciation on additional construcion:
Total depreciation per year= 22300+ 7,366.67 = 29666.67
if there is a change in useful life no entry is required, only depreciation expense every year adjusted prospectively.
Annual depreciation from 2019:
Depreciation from 2019= Depreciatin on original building + Depreciatin on additional contruction
Depreciatin on original building:
Depreciation on additional costruction:
Total depreciation per year on building= 8362.5 +5064.58 = 13427.08
Cost 920000 Salvage value 28000 Useful life 40 years Depreciation per year = (cost-salvage value)/ useful life = ( 920000-28000) /40 = 22300