Chapter 7, Problem 7.43BE

  LO 3

(Learning Objective 3: Change a plant asset’s useful life) Chester Consultants purchased a building for $430,000 and depreciated it on a straight-line basis over 40 years. The estimated residual value was $70,000. After using the building for 20 years. Chester realized that the building would remain useful only 14 more years. Starting with the 21st year, Chester began depreciating the building over the newly revised total life of 34 years and decreased the estimated residual value to $12,980. Record depreciation expense on the building for years 20 and 21.

  LO 3,4

 E7-44B, (Learning Objectives 3, 4: Compute depreciation; record a gain or loss on disposal) On January 1, 2017. Lincoln Manufacturing purchased a machine for $930,000. The company expected the machine to remain useful for eight years and to have a residual value of $110,000. Lincoln Manufacturing uses the straight-line method to depreciate its machinery, Lincoln Manufacturing used the machine for four years and sold it on January 1, 2021, for $250,000.

    1.    Compute accumulated depreciation on the machine at January 1, 2021 (same as December 31, 2020).

  2.    Record the sale of the machine on January 1, 2021.