A Number of Major Structural Repairs Completed at the Beginning

question 39

Essay

A number of major structural repairs completed at the beginning of the current fiscal year at a cost of $1,000,000 are expected to extend the life of a building 10 years beyond the original estimate. The original cost of the building was $6,552,000, and it has been depreciated by the straight-line method for 25 years. Estimated residual value is negligible and has been ignored. The related accumulated depreciation account after the depreciation adjustment at the end of the preceding fiscal year is $4,550,000.
(a)What has the amount of annual depreciation been in past years?
(b)What was the original life estimate of the building?
(c)To what account should the $1,000,000 be debited?
(d)What is the book value of the building after the extraordinary repairs have been made?
(e)What is the expected remaining life of the building after the extraordinary repairs have been made?
(f)What is the amount of straight-line depreciation for the current year, assuming that the repairs were completed at the very beginning of the current year? Round to the nearest dollar.

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Definitions:

General Motors

An American multinational corporation headquartered in Detroit, Michigan, that designs, manufactures, markets, and distributes vehicles and vehicle parts.

Sunbelt

A region in the United States defined by its warm climate, extending across the Southeast and Southwest, notable for its significant economic growth and population increase in the late 20th century.

Right-to-Work Laws

Legislation that prohibits union security agreements, allowing employees in unionized workplaces to opt out of joining the union and paying union dues.

Closed Shops

Workplaces where all employees must be members of a specific labor union as a condition of employment, effectively limiting hiring to union members only.