Assume C -1 Designing Consultants purchased a building for $500,000 and deprecia

Question

Assume C -1 Designing Consultants purchased a building for $500,000 and depreciated it on a straight-line basis over 40 years. The estimated residual value was $55,000. After using the building for 20 years, C -1 realized that the building will remain useful only 15 more years. Starting with the 21st year, C -1 began depreciating the building over a revised total life of 35 years and decreased the residual value to $20,250. Requirement Record depreciation expense on the building for years 20 and 21. (Record debits first, then credits. Explanations are not required.) Start by recording depreciation expense on the building for year 20. Now record depreciation expense on the building for year 21.

Explanation / Answer

Calculation of the Depreciation for 1st 20 years Depreciation per year = Cost- Residual/ Life (500000-55000)/40 11125 $ 11125 per year Depreciation for 20th year would be $ 11125 20 Years Depreciation 11125*20 222500 Balance cost 500000-222500 277500 New Depreciation 277500-20250/15 17150 For 21st year dep would be $ 17150 Journal Entries For year 20 Depreciation Dr 11125 To Building 11125 For year 21 Depreciation Dr 17150 To Building 17150

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