Question

Exercise 11-13 Skysong Company constructed a building at a cost of $2,332,000 and occupied it beginning in January 2001. It was estimated at that time that its life would be 40 years, with no salvage value. In January 2021, a new roof was installed at a cost of $318,000, and it was estimated then that the building would have a useful life of 25 years from that date. The cost of the old roof was $169,600.

A.) What amount of depreciation should have been charged annually from the years 2001 to 2020? (Assume straight-line depreciation.)

B.) What entry should be made in 2021 to record the replacement of the roof? (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
(To record the disposition of the old roof.)
(To record the installation of the new roof.)

C.) Prepare the entry in January 2021 to record the revision in the estimated life of the building, if necessary. (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

D.) What amount of depreciation should be charged for the year 2021?

Depreciation for the year 2021 (Assume the cost of the old roof is removed)		$
Depreciation for the year 2021 (Assume the cost of the new roof is debited to accumulated depreciation - building)		$

Answer 1

A)
Annual depriciation = Cost of building / Estimate useful life                                                                                      = $2,332,000 / 40 Years                                                                                      = $58,300
Depriciation charged from 2001 to 2020 (20 years) = 20 years x $58,300                                                                                                       =   $1,166,000
B)
Date	Account titles and explanation	Debit (in $)	Credit (in $)
	Loss on disposal of roof (Bal. Fig.)	$84,800
	Accumulated depriciation ($169,600 x 20/40)	$84,800
	Building		$169,600
	(To record the Loss on disposal of roof)
	Building	$318,000
	Cash		$318,000
	(To record the Loss on disposal of roof)
C)
Date	Account titles and explanation	Debit (in $)	Credit (in $)
	No Entry Required
	(Since not required for revision of estimated life)
	(Since not required for revision of estimated life)
Depriciataion charged for the year 2021 ( (assuming the cost of the old roof is removed)
	Building ($2,332,000 (-) $169,600 + $318,000)	$2,480,400
	Less - Accumulated depericiation               ($58,300*20 years - $84,800)	($1,081,200)
		$1,399,200
	Remaining useful life	25 years
	Depericiation for the year 2021 ($1,399,200/25 years)	$55,968
Depriciataion charged for the year 2021 ( (Assuming the cost of the old roof is is debited to accumulated depriciation-building)
	Book value of the building prior to the replacement of roof ) $2,332,000 (-) (58,300 x 20 years)	$1,166,000
	Add: Cost of the new roof	$318,000
		$1,484,000
	Remaining useful life	25 Years
	Depericiation 2021 ($1,484,000/25 years)	$59,360