In: Accounting
In 1993, Windsor Company completed the construction of a building at a cost of $2,160,000 and first occupied it in January 1994. It was estimated that the building will have a useful life of 40 years and a salvage value of $65,600 at the end of that time. Early in 2004, an addition to the building was constructed at a cost of $540,000. 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 $21,600. In 2022, it is determined that the probable life of the building and addition will extend to the end of 2053, or 20 years beyond the original estimate.
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1 | ||
Cost | 2160000 | |
Less: Salvage value | 65600 | |
Depreciable cost | 2094400 | |
Useful life | 40 | |
Annual depreciation from 1994 through 2003 | 52360 | / yr. |
2 | ||
Cost | 2160000 | |
Add: Additions | 540000 | |
Total cost | 2700000 | |
Less: Accumulated depreciation from 1994 through 2003 | 523600 | =52360*10 |
Book value, Jan 2004 | 2176400 | |
Less: Salvage value | 87200 | =65600+21600 |
Depreciable cost | 2089200 | |
Useful life | 30 | |
Annual depreciation from 2004 through 2021 | 69640 | / yr. |
3 | ||
No entry is required because of the revision of the estimated life in 2021 | ||
Account Titles and Explanation | Debit | Credit |
No entry | 0 | |
No entry | 0 | |
4 | ||
Book value, Jan 2004 | 2176400 | |
Less: Accumulated depreciation from 2004 through 2021 | 1253520 | =69640*18 |
Book value, Jan 2022 | 922880 | |
Less: Salvage value | 87200 | =65600+21600 |
Depreciable cost | 835680 | |
Useful life | 32 | =12+20 |
Annual depreciation expense—building | 26115 |