Colquhoun International purchases a warehouse for $300,000. The best estimate of the salvage value at the time of purchase was $15,000, and it is expected to be used for twenty-five years. Colquhoun uses the straight-line depreciation method for all warehouse buildings. After four years of recording depreciation, Colquhoun determines that the warehouse will be useful for only another fifteen years.

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Colquhoun International purchases a warehouse for $300,000. The best estimate of the salvage value at the time of purchase was $15,000, and it is expected to be used for twenty-five years. Colquhoun uses the straight-line depreciation method for all warehouse buildings. After four years of recording depreciation, Colquhoun determines that the warehouse will be useful for only another fifteen years.

• At time of purchase, annual depreciation was
Calculate annual depreciation expense for the first four years. Determine the depreciation expense for
the final fifteen years of the asset's life:
Original cost
Depreciation previously taken
Book value at beginning of year five
Salvage value
Revised remaining depreciable cost
Revised remaining useful life
15 years
Revised annual depreciation
and create the depreciation expense journal entry for year five:
DR
CR
Transcribed Image Text:• At time of purchase, annual depreciation was Calculate annual depreciation expense for the first four years. Determine the depreciation expense for the final fifteen years of the asset's life: Original cost Depreciation previously taken Book value at beginning of year five Salvage value Revised remaining depreciable cost Revised remaining useful life 15 years Revised annual depreciation and create the depreciation expense journal entry for year five: DR CR
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