Accounting

Process Costing
October 29, 2020
Quiz
October 29, 2020

1. In 1988, Abraham Company completed the construction of a building at a cost of €1,900,000 and first occupied it in January 1989. It was estimated that the building will have a useful life of 40 years and a residual value of €60,000 at the end of that time. Early in 1999, an addition to the building was constructed at a cost of €470,000. At that time it was estimated that the remaining life of the building would be, as originally estimated, an additional 30 years, and that the addition would have a life of 30 years and a residual value of €20,000. In 2017, it is determined that the probable life of the building and addition will extend to the end of 2048, or 20 years beyond the original estimate.

Instructions

(a) Using the straight-line method, compute the annual depreciation that would have been charged from 1989 through 1998.

(b) Compute the annual depreciation that would have been charged from 1999 through 2016.

(c) Prepare the entry, if necessary, to adjust the account balances because of the revision of the estimated life in 2017.

(d) Compute the annual depreciation to be charged beginning with 2017

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