Gahal Ltd. has a fiscal year ending on December 31. The company owns a building that it purchased on January 1, 2023, for $6,000,000 (excluding the land value). Management estimates the useful life to be 30 years, with no residual value. The company uses the - straight line depreciation method. The following additional information is available. Dec 31, 2023 - Fair value: $6,100,000 Dec 31, 2024 - Fair value: $ 5,000,000 (The local economy has gone into a significant recession and real estate values have declined.) Required: The company uses the revaluation model (asset adjustment method) to account for its property, plant, and equipment. Prepare the year - end adjusting entries for 2023 and 2024 (Round to the nearest dollar).

Gahal Ltd. has a fiscal year ending on December 31. The company owns a building that it purchased on January 1, 2023, for $6,000,000 (excluding the land value). Management estimates the useful life to be 30 years, with no residual value. The company uses the - straight line depreciation method. The following additional information is available. Dec 31, 2023 - Fair value: $6,100,000 Dec 31, 2024 - Fair value: $ 5,000,000 (The local economy has gone into a significant recession and real estate values have declined.) Required: The company uses the revaluation model (asset adjustment method) to account for its property, plant, and equipment. Prepare the year - end adjusting entries for 2023 and 2024 (Round to the nearest dollar).

Intermediate Accounting: Reporting And Analysis

3rd Edition

ISBN:9781337788281

Author:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Publisher:James M. Wahlen, Jefferson P. Jones, Donald Pagach

Chapter22: Accounting For Changes And Errors.

Section: Chapter Questions

Problem 7RE: Bliss Company owns an asset with an estimated life of 15 years and an estimated residual value of...

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On January 1, 2014, Klinefelter Company purchased a building for 520,000. The building had an estimated life of 20 years and an estimated residual value of 20,000. The company has been depreciating the building using straight-line depreciation. At the beginning of 2020, the following independent situations occur: a. The company estimates that the building has a remaining life of 10 years (for a total of 16 years). b. The company changes to the sum-of-the-years-digits method. c. The company discovers that it had ignored the estimated residual value in the computation of the annual depreciation each year. Required: For each of the independent situations, prepare all journal entries related to the building for 2020. Ignore income taxes.
Kam Company purchased a machine on January 2, 2019, for 20,000. The machine had an expected life of 8 years and a residual value of 300. The double-declining-balance method of depreciation is used. Required: 1. Compute the depreciation expense for each year of the assets life and book value at the end of each year. 2. Assuming that the company has a policy of always changing to the straight-line method at the midpoint of the assets life, compute the depreciation expense for each year of the assets life. 3. Assuming that the company always changes to the straight-line method at the beginning of the year when the annual straight-line amount exceeds the double-declining-balance amount, compute the depreciation expense for each year of the assets life.
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Bliss Company owns an asset with an estimated life of 15 years and an estimated residual value of zero. Bliss uses the straight -line method of depreciation. At the beginning of the sixth year, the assets book value is 200,000 and Bliss changes the estimate of the assets life to 25 years, so that 20 years now remain in the assets life. Explain how this change will be accounted for in Blisss financial statements, and compute the current and future annual depreciation expense.
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