Reference no: EM133104611
Question - 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. In December 2011, her attention focused on two assets in particular:
|
|
Date acquired
|
Cost
|
Accumulated depreciation end of 2011
|
Useful life
|
Residual value
|
|
Warehouse
|
1/1/07
|
$200,000
|
$50,000
|
25 years
|
$10,000
|
|
Building
|
1/1/06
|
$1,600,000
|
$228,000
|
40 years
|
$100,000
|
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 $6000.
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.
Required - Calculate the revised annual depreciation expenses for each asset in 2012, and compare them to what the expenses would be if the changes were not made.