RCES Exercise 9-8 (Part Level Submission) ve Terry Wade, the new controller of H

Question

RCES Exercise 9-8 (Part Level Submission) ve Terry Wade, the new controller of Hellickson Company, has reviewed the expected useful lives and salvage values of selected depreciable assets at the beginning of 2017. His findings are as follows. Accumulated Depreciation Useful life in Years Date Salvage Value Cost 7 Old Proposeda Type of Asset AequiredCost Building 1/1/11 828,000 $118,950 40 Warehouse 1/1/12 120,000 23,160 25 1/1/17 Old Proposed Old Proposed 50 $35,000 $88,650 20 4,200 21,840 All assets are depreciated by the straight-line method. Hellickson Company uses a calendar year in preparing annual financial statements. After discussion, management has agreed to accept Terry's proposed changes.

Explanation / Answer

Building Warehouse Revised Annual depreciation $ 14,100 $ 5,000 Working: When any estimates are revised in terms of depreciatiable assets, depreciation is calculated according to revised estimates. Building Warehouse Cost        8,28,000        1,20,000 Less:Accumulated depreciation upto Jan 1, 2017        1,18,950           23,160 Book Value as on January 1, 2017 a        7,09,050           96,840 Revised salvage value b           88,650           21,840 Revised remaining life c                    44                    15 Revised annual depreciation (a-b)/c           14,100              5,000

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