Use these terms for the account portion: Assume C -1 Designing Consultants purch

Question

Use these terms for the account portion:

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 1. 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

Year 20 Account Title Dr Cr Year 20 Depreciation Expense $11125 Accumulated Depreciation 11125 (500000-55000)/40 will be depreciation to be recorded intitially $11125 as per SLM will be yearly depreciation, so debited to depreciation expense and credited to accumulated depreciation Year 21 Depreciation Expense $17,150 Accumulated Depreciation $17,150 It is revised so depreciation will be calculated for prospective years (Historical Cost-Accumulated Depreciation)-Salvage value/Remaining Life (500000-(11125*20))-20250/15 (500000-222500)-20250/15 17150

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