Lumen OHM Assessment

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Fix-It Hardware purchased a building for $449,900 and depreciated it on a straight-line basis over a 35 year period. The estimated residual value is $101,580.

After using the building for 15 years, Fix-It Hardware realized that wear and tear on the building would wear it out before 35 years and that the estimated residual value should be $88,740.

Starting with the 16th year, Fix-it Hardware began depreciating the building over a revised total life of 20 years using the new residual value.

*Round all values to the nearest whole number.

Straight-line

Straight-line Method = $($ Cost $-$ Residual Value $)$ $/$ Time $=$ Depreciation per year

Straight-line Method = $($ $ $-$ $ $)$ $/$ $=$ $ per year

Accumulated depreciation after 15 years

Depreciation X Years = Amount after 15 years

$ X $=$ $

Book value after 15 years

Cost $-$ Accumulated Depreciation $=$ Book Value

$ $-$ $ $=$ $

Revised depreciation

Straight-line Method = $($ Book Value $-$ Residual Value $)$ $/$ Time $=$ Depreciation per year

Straight-line Method = $($ $ $-$ $ $)$ $/$ $=$ $ per year

Journalize depreciation expense on the building for years 15 and 16.

Journal
Date	Description	Debit	Credit
Year 15
Year 15

Year 16
Year 16

Straight-line Method = ($449,900

$-$ $101,580)

$/$ 35 = $9,952 per year; Accumulated depreciation after 15 years = ($9,952 X 15

$=$ $149,280; Book value after 15 years = $449,900

$-$ $149,280

$=$ $300,620; Revised depreciation: Straight-line Method = ($300,620

$-$ 88,740)

$/$ 5

$=$ $42,376 per year

Journal
Date	Description	Debit	Credit
Year 15	Depreciation Expense	9,952
Year 15	Accumulated Depreciation - Building		9,952

Year 16	Depreciation Expense	42,376
Year 16	Accumulated Depreciation - Building		42,376