Exercise 11-13 (Part Level Submission) Sweet Company constructed a building at a
ID: 2558697 • Letter: E
Question
Exercise 11-13 (Part Level Submission)
Sweet Company constructed a building at a cost of $2,442,000 and occupied it beginning in January 1998. It was estimated at that time that its life would be 40 years, with no salvage value.
In January 2018, a new roof was installed at a cost of $333,000, 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 $177,600.
(a)
Account Titles and Explanation
Debit
Credit
(To record the disposition of the old roof.)
(To record the installation of the new roof.)
Exercise 11-13 (Part Level Submission)
Sweet Company constructed a building at a cost of $2,442,000 and occupied it beginning in January 1998. It was estimated at that time that its life would be 40 years, with no salvage value.
In January 2018, a new roof was installed at a cost of $333,000, 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 $177,600.
Explanation / Answer
Dear Student
(a)
Therefore Depreciation to be charged for each year till 2017 is $ 61,050/-.
Now on installing new Roof, its cost shall also be added to the cost of Building and there would be no adjustment for the cost of the old roof as we have already provided depreciation for Building for so many years and hence it shall be written off in the remaining life of the building.
The Journal entries for the same shall be :
Please note that since the creation of new roof is a capital expenditure it is added to the cost of the building.
Hope this helps
Regards
Calculation of Annual Depreciation from 1998 to 2017 using Straight line method Particulars Amt Orignal Cost of the Building 2,442,000 Life of Building (in Years) 40 Depreciation per year (2,442,000 / 40) 61,050Related Questions
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