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In 1993, Herman Moore Company completed the construction of a building at a cost of $2,000,000 and first occupied it in January 1994. It was estimated that the building will have a useful life of 40 years and a salvage value of$60,000 at the end of that time.

Early in 2004, an addition to the building was constructed at a cost of $500,000. At that time, it was estimated that the remaining life of the building would be, as originally estimated, an additional 30 years. and that the addition would have a life of 30 years and a salvage value of$20,000.

In 2022, it is determined that the probable life of the building and addition will extend to the end of 2053, or 20 years beyond the original estimate.

**Instructions**

**a.** Using the straight-line method, compute the annual depreciation that would have been charged from 1994 through 2003.

**b.** Compute the annual depreciation that would have been charged from 2004 through 2021.

**c.** Prepare the entry, if necessary, to adjust the account balances because of the revision of the estimated life in 2022,

**d.** Compute the annual depreciation to be charged, beginning with 2022.

Solution

VerifiedIn this exercise, we need to compute the depreciation expense of Herman Moore Company using straight-line method.

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