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Bailey Corporation purchased a building on December 31, 2003 for $2,500,000. The building was placed in service on January 1, 2004 and was assumed to have an estimated useful life of 50 years and a zero
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24 votes
24 votes
Bailey Corporation purchased a building on December 31, 2003 for $2,500,000. The building was placed in service on January 1, 2004 and was assumed to have an estimated useful life of 50 years and a zero salvage value. Bailey uses the straight line method for computing depreciation, and all applicable depreciation has been recorded through December 31, 2017. During 2018, an examination of the building by an engineering firm revealed that the remaining estimated useful life is now 15 years. What amount should Bailey record for building depreciation expense in 2018

User Mfrackowiak
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11 votes
11 votes

Answer: $120,000

Step-by-step explanation:

The annual depreciation will be calculated as:

= Cost/Estimated Life

= 2500000/50

= 50000

The depreciation up to 2017 will be:

= 50000 × 14

= 700000

The book value at the end of 2017 will be:

= Cost - Depreciation up to 2017

= 2500000 - 700000

= 1800000

Then, the annual depreciation with the revised life will be:

= Book Value at the End of 2017/Remaining Life

= 1800000/15

= 120000

Therefore, the amount of depreciation for 2018 will be $120000

User Gurmeet
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