**Revision of Depreciation**A building with a cost of $236,250 has an estimated residual value of $47,250, an estimated useful life of 9 years, and is depreciated by the straight-line method.a. What is the amount of the annual depreciation? Do not round intermediate calculations. $[______]b. What is the book value at the end of the fifth year of use? $[______]c. If at the start of the sixth year it is estimated that the remaining life is 5 years and that the residual value is $11,250, what is the depreciation expense for each of the remaining 5 years? $[______]---**Explanation:**The text outlines a scenario regarding the depreciation of a building using the straight-line method. The straight-line depreciation method involves subtracting the residual value from the cost of the asset and then dividing by the useful life to determine the annual depreciation expense.**Formula:**1. Annual Depreciation Expense = (Cost - Residual Value) / Useful LifeIn part (c), it is reassessed to compute the depreciation expense based on revised estimates for the remaining life and residual value.

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Description: **Revision of Depreciation**A building with a cost of $236,250 has an estimated residual value of $47,250, an estimated useful life of 9 years, and is depreciated by the straight-line method.a. What is the amount of the annual depreciation? Do not r

Requirement a: Compute the amount of depreciation.

Business

Accounting

a. What is the amount of the annual depreciation? Do not round intermediate calculations. b. What is the book value at the end of the fifth year of use? C. If at the start of the sixth year it is estimated that the remaining life is 5 years and that the residual value is $11,250, what is the depreciation expense for each of the remaining 5 years?

a. What is the amount of the annual depreciation? Do not round intermediate calculations. b. What is the book value at the end of the fifth year of use? C. If at the start of the sixth year it is estimated that the remaining life is 5 years and that the residual value is $11,250, what is the depreciation expense for each of the remaining 5 years?

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Depreciation Methods

The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.

Depreciation Accounting

In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.

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Question

**Revision of Depreciation**

A building with a cost of $236,250 has an estimated residual value of $47,250, an estimated useful life of 9 years, and is depreciated by the straight-line method.

a. What is the amount of the annual depreciation? Do not round intermediate calculations.
$[______]

b. What is the book value at the end of the fifth year of use?
$[______]

c. If at the start of the sixth year it is estimated that the remaining life is 5 years and that the residual value is $11,250, what is the depreciation expense for each of the remaining 5 years?
$[______]

---

**Explanation:**

The text outlines a scenario regarding the depreciation of a building using the straight-line method. The straight-line depreciation method involves subtracting the residual value from the cost of the asset and then dividing by the useful life to determine the annual depreciation expense.

**Formula:**
1. Annual Depreciation Expense = (Cost - Residual Value) / Useful Life

In part (c), it is reassessed to compute the depreciation expense based on revised estimates for the remaining life and residual value.

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