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A building was purchased for $100,000 on January 1, 2008. It was estimated to have no...

A building was purchased for $100,000 on January 1, 2008. It was estimated to have no salvage value and to have an estimated useful life of 20 years. On January 1, 2013, the estimated useful life was changed from 20 years to 30 years. Compute depreciation expense for 2013. Use straight-line depreciation.

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Answer #1

Depreciation each year under the Straight line method = (cost - salvage value) / useful life

= ($100,000 - $0) / 20

= $5,000

Accumulated depreciation on January 1, 2013 = $5,000 * 5 = $25,000

Book value on January 1, 2013 = Cost - Accumulated depreciation

= $100,000 - $25,000

= $75,000

Revised useful life = 30 years.

Revised remaining useful life = 30 years - 5 years

= 25 years.

Depreciation each year from 2013 = (Book value - Salvage value) / Remaining useful life

= ($75,000 - $0) / 25

= $3,000

Depreciation expense for 2013 = $3,000

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