Reference no: EM133205873
In 1991, Bonita Limited completed the construction of a building at a cost of $2.42 million; It occupled the building in January 1992. It was estimated that the building would have a useful life of 40 years and a residual value of $380,000.
Early In 2002, an addition to the building was constructed at a cost of $1,230,000. At that time, no changes were expected in its useful life, but the residual value with the addition was estimated to Increase by $150,000. The addition would not be of economic use to the company beyond the life of the original building
In 2020, as a result of a thorough review of its depreciation policles, company management determined that the building's original useful life should have been estimated at 30 years. The neighbourhood where the building is has been going through a renewal, with older buildings being torn down and new ones being built. Because of this, it is now expected that the company's building and addition are unlikely to have any residual value at the end of the 30-year perlod. Bonita Limited follows IFRS for Its financial statements.
Required
A. Prepare the entry, if necessary, to adjust the account balances because the estimated useful life was revised in 2020. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts.)
B. Calculate the annual depreciation to be charged beginning with 2020. Annual depreciation, beginning with 2020