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In 1990, Metlock Company completed the construction of a building at a cost of $2,300,000 and...

In 1990, Metlock Company completed the construction of a building at a cost of $2,300,000 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 $69,000 at the end of that time.

Early in 2001, an addition to the building was constructed at a cost of $575,000. 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 $23,000.

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.

Compute the annual depreciation to be charged, beginning with 2019.

Solutions

Expert Solution

Annual depreciation to be charged, beginning with 2019 27816 (Rounded off)
Workings:
Cost 2300000
Less: Salvage value 69000
Depreciable cost 2231000
Useful life 40
Annual depreciation from 1991 through 2000 55775 / yr.
Cost 2300000
Add: Additions 575000
Total cost 2875000
Less: Accumulated depreciation from 1991 through 2000 557750 =55775*10
Book value, Jan 2001 2317250
Less: Salvage value 92000 =69000+23000
Depreciable cost 2225250
Useful life 30
Annual depreciation from 2001 through 2018 74175 / yr.
Book value, Jan 2001 2317250
Less: Accumulated depreciation from 2001 through 2018 1335150 =74175*18
Book value, Jan 2019 982100
Less: Salvage value 92000 =69000+23000
Depreciable cost 890100
Useful life 32 =12+20
Annual depreciation expense—building 27816

ekkarill92 answered 2 years ago
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