Business, 08.04.2020 03:26 emileep13

Victor Mineli, the new controller of Pharoah Company, has reviewed the expected useful lives and salvage values of selected depreciable assets at the beginning of 2022. Prepare the entry to record depreciation on the building in 2022.

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Answer from: kenziepickup

*The revised annual depreciation charge from 2022 based on the changes are:

Building = $11,938

Warehouse = $7,785

*The depreciation to be posted in 2022 however is:

Building = -$26,758 (depreciation over stated and now adjusted to compensate for this)

Warehouse = $15,510

Explanation:

Depreciation is a means of technically writing off the wasting or otherwise utilized portion of an asset over time. It is a means of recognizing the wear and tear of an asset and obsolescence driven by changing technology over time.

A straight line depreciation method indicates that throughout the life of the Asset a uniform depreciation charge will be applied until the written down value equals zero or the projected Salvage Value.

The Salvage value is the value the business projects to dispose of the Asset after its useful life has been fully expired.

Pharoah Company

Building cost = $728,500

Year of acquisition = Jan 1 2014

Accumulated depreciation = $134,200

Years depreciated for = 8 years

Depreciation per year =>$134,200/ 8 = $16,775

Useful life = 40yrs

Old salvage value = $57,500

New useful life = 58 years

New Salvage Value = $36,100

Step 1. Determine the depreciable value from Original cost

= $728,500 minus $36,100 = $692,400

Step 2. Determine yearly depreciation charge over 58 years

= $692,400 divided by 58 = $11,938

Step 3. Determine what the depreciation should be up to 2022

= $11,938 x 9years = $107,442

Step 4. Deduct this from Depreciation charged to date to derive the depreciation for 2022.

= $107,442 minus $134,200 = -$26,758 (this implies the Asset had been over depreciated and this entry intends to correct its written down value)

Warehouse cost = $161,500

Year of acquisition = Jan 1 2017

Accumulated depreciation = $31,200

Years depreciated for = 5 years

Depreciation per year =>$31,200/ 5 = $6,240

Useful life = 25yrs

Old salvage value = $5,500

New useful life = 20 years

New Salvage Value = $5,800

Step 1. Determine the depreciable value from Original cost

= $161,500 minus $5,800 = $155,700

Step 2. Determine yearly depreciation charge over 20 years

= $155,700 divided by 20 = $7,785

Step 3. Determine what the depreciation should be up to 2022

= $7,785 x 6years = $46,710

Step 4. Deduct this from Depreciation charged to date to derive the depreciation for 2022.

= $46,710 minus $31,200 = $15,510 (this will be the depreciation charge for 2022)

Answer from: Quest

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explanation:

Answer from: Quest

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