Exercise 11-13 Kingbird Company constructed a building at a cost of $2,706,000 a

Question

Exercise 11-13 Kingbird Company constructed a building at a cost of $2,706,000 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 $369,000, 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 $196,800. What amount of depreciation should have been charged annually from the years 1998 to 2017? (Assume straight-line depreciation.) Depreciation from the years 1998 to 2017 SHOW LIST OF ACCOUNTS LINK TO TEXT LINK TO TEXT

Explanation / Answer

Ans 1 Annual depriciation = Cost of building / Estimate useful life 2706000/40 = 67650 Depriciation from 1998 to 2017 (20 years) = 20*67650 = 1353000 Ans 2 Journal entry Debit Credit Loss on disposal of roof (Debit) 98400 Accumulated depriciation (Debit) 98400             Building (Credit) 196800 (196800*20/40) Building (Debit) 369000          Cash (credit) 369000 Ans .3 Journal entry to record the revision in the estimated life NO ENTRY Ans 4 Depricitaion for the year 2018 (assume the cost of the old roof is removed) Building (2706000-196800+369000) 2878200 Less - Accumulated depericiation(67650*20 - 98400) 1254600 1623600 Remaining useful life 25 years Depericiation for the year 2018 (1623600/25) 64944 Depriciation for the year 2018(Assume the cost of new roof is debited to accumulated depriciation-building) Book value of the building prior to the replacement of roof )2706000-(67650*20) 1353000 Add: Cost of the new roof 369000 1722000 Remaining useful life 25 years Depericiation 2018 (1722000/25) 68880

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