Question

Martinez Company owns a building that appears on its prior year-end balance sheet at its original $572,000 cost less $429,000 accumulated depreciation. The building is depreciated on a straight-line basis assuming a 20-year life and no salvage value. During the first week in January of the current calendar year, major structural repairs are completed on the building at a $68,350 cost. The repairs extend its useful life for 5 years beyond the 20 years originally estimated.

1. Determine the building’s age (plant asset age) as of the prior year-end balance sheet date.

2. Prepare the entry to record the cost of the structural repairs that are paid in cash.

Journal entry worksheet

• Record the structural cost of $68,350 paid in cash.

Note: Enter debits before credits.

	Transaction General Journal Debit Credit 1

Answer 1

1) The building’s age (plant asset age) as of the prior year- end balance sheet date is calculated as follows:

Depreciation p.a. = (Cost - Salvage Value) / Useful Life

                          = ($572,000 - $0) / 20 Years

                          = $572,000 / 20 Years

                          = $28,600

Building’s age (plant asset age) = Accumulated Depreciation / Depreciation p.a

                                              = $429,000 / $28,600

                                               = 15 Years

The building’s age (plant asset age) as of the prior year-end balance sheet date is 15 Years.

2) The journal entry to record the cost of the structural repairs that are paid in cash is as follows:

Date	Account and Explanation	Debit($)	Credit($)
1)	Building	68,350
	Cash		68,350
	(Recorded the major structural repairs are paid)

Note : Major structural repairs extend its useful life for 5 years beyond the 20 years originally estimated, so the cost of the structural repairs is debited to Building.