Question

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.

Using the straight-line method, compute the annual depreciation that would have been charged from 1994 through 2003.

Annual depreciation from 1994 through 2003

$

/ yr.

Compute the annual depreciation that would have been charged from 2004 through 2022.

Annual depreciation from 2004 through 2021

$

/ yr.

Prepare the entry, if necessary, to adjust the account balances because of the revision of the estimated life in 2021. (If no entry is required, select "No entry" for the account titles and enter 0 for the amounts. Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Account Titles and Explanation	Debit	Credit

Compute the annual depreciation to be charged, beginning with 2022. (Round answer to 0 decimal places, e.g. 45,892.)

Annual depreciation expense—building

$ ?

Answer 1

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