LHD Freight purchased a building for $ 700,000 and depreciated it on a straight-line basis over a
Question:
LHD Freight purchased a building for $ 700,000 and depreciated it on a straight-line basis over a 40-year period. The estimated residual value was $ 100,000. After using the building for 15 years, LHD realized that wear and tear on the building would force the company to replace it before 40 years. Starting with the sixteenth year, LHD began depreciating the building over a revised total life of 30 years and increased the estimated residual value to $ 175,000. Record depreciation expense on the building for years 15 and 16.
Step by Step Answer:
Journal DATE ACCOUNT DR CR Year 15 DepreciationExpense Building 15000 AccumulatedDepre...View the full answer
Financial Accounting
ISBN: 978-0132889711
1st Canadian Edition
Authors: Jeffrey Waybright, Liang Hsuan Chen, Rhonda Pyper
Related Video
In accounting terms, depreciation is defined as the reduction of the recorded cost of a fixed asset in a systematic manner until the value of the asset becomes zero or negligible. An example of fixed assets are buildings, furniture, office equipment, machinery, etc. The land is the only exception that cannot be depreciated as the value of land appreciates with time. Depreciation allows a portion of the cost of a fixed asset to be the revenue generated by the fixed asset. This is mandatory under the matching principle as revenues are recorded with their associated expenses in the accounting period when the asset is in use. This helps in getting a complete picture of the revenue
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