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Question - At 30 June 2019, the financial statements of McMaster Ltd showed a building with a cost (net of GST) of $228,000 and accumulated depreciation of $116,000. The business uses the straight-line method to depreciate the building. When acquired, the building's useful life was estimated at 30 years and its residual value at $46,000. On 1 January 2020, McMaster Ltd made structural improvements to the building costing $71,000 (net of GST). Although the capacity of the building was unchanged, it is estimated that the improvements will extend the useful life of the building to 40 years, rather than the 30 years originally estimated. No change is expected in the residual value.
a) Calculate the number of years the building had been depreciated to 30 June 2019.
b) Give the general journal entry to record the cost of the structural improvements on 1 January 2020.
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