Reference no: EM132960723
At the end of each year, Patty Chu, the chief accountant at Rex Lin Enterprises, a Singapore-based trading company, reviews long-term assets at the end of each year to determine whether changes are called for in how these assets are depreciated.
Date acquired 1/1/13, Cost Accumulated -$200,000,
depreciation end of 2017- $50,000,
Useful life 25 years, Residual value$10,000
Date acquired 1/1/12, Cost Accumulated 1,600,000,
depreciation end of 2017- 228,000,
Useful life-40 years and
Residual value100,000
Patty is proposing the following changes:
For the warehouse: a decrease in the useful life to 20 years and a decrease in residual value to
$6,000. For the building: an increase in the useful life to 50 years and a decrease in the residual value to $55,000. Before agreeing to the changes,
- Patty's bosses would like to know what the depreciation charges will be for each asset if the changes are adopted. All assets are depreciated using the straight-line method.
Problem 1: Calculate the revised annual depreciation expenses for each asset in 2018 and compare them to what the expenses would be
if the changes were not made?
Problem 2: Compare the results of the old and new depreciation expense amounts. What do you think the impact is to the income statement and balance sheet if these changes are approved? Do you think the changes should be made and why?