Question

# Exercise 9-6 Victor Mineli, the new controller of Crane Company, has reviewed the expected useful lives...

Exercise 9-6

Victor Mineli, the new controller of Crane Company, has reviewed the expected useful lives and salvage values of selected depreciable assets at the beginning of 2017. Here are his findings:

Type of
Asset
Date
Acquired
Cost
Accumulated
Depreciation,
Jan. 1, 2017
Useful Life (in years)
Salvage Value
Old
Proposed
Old
Proposed
Building
Jan. 1, 2009 \$772,000 \$141,800 40 48 \$63,000 \$35,200
Warehouse
Jan. 1, 2012 164,000 31,690 25 20 5,550 5,400

All assets are depreciated by the straight-line method. Crane Company uses a calendar year in preparing annual financial statements. After discussion, management has agreed to accept Victor’s proposed changes. (The “Proposed” useful life is total life, not remaining life.)

Compute the revised annual depreciation on each asset in 2017. (Round answers to 0 decimal places, e.g. 125.)

Building
Warehouse
Revised annual depreciation
\$enter a dollar amount
\$enter a dollar amount

Prepare the entry to record depreciation on the building in 2017. (Round answers to 0 decimal places, e.g. 125. Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

Account Titles and Explanation
Debit
Credit
enter an account title
enter a debit amount
enter a credit amount
enter an account title
enter a debit amount
enter a credit amount

Solution :-

Compute the revised annual depreciation on each asset in 2017 :-

 Building Warehouse Revised annual depreciation = [ \$772,000 - \$141,800 - \$35,200 ] / 40 = [ \$772,000 - 177,000 ] / 40 = 595,000 / 40 = \$14,875 = [ \$164,000 - \$31,690 - \$5,400 ] / [ 40 - 25 ] = [ 164,000 - 37,090 ] / 15 = 126,910 / 15 = \$8,460

Prepare the entry to record depreciation on the building in 2017 :-

 Particulars Debit Credit Depreciation expense \$14,875 Accumulated depreciation - building \$14,875 ( To record depreciation on buildings )

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