Reference no: EM133190237

The purpose of this assignment is to analyze long-term assets in the financial statements, and to consider financial implications associated with long-term assets.

Use Microsoft Excel to show the calculations of depreciation prior to and after the recommended changes. In addition, in a Microsoft Word document, In a memo from Patty Chu to Patty's boss comparing the results of the old and new depreciation expense amounts. Within the memo, discuss the impact to the income statement and balance sheet if these changes are approved. Finally, provide a recommendation on whether the changes should be made; use your calculations to support your position.

Problem 10.5

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 2017, her attention focused on two assets in particular:

	Date Acquired	Cost	Accumulated Depreciation end of 2017	Useful Life	Residual Value
Warehouse	1/1/13	$200.000	$50,000	25 years	$10,000
Building	1/1/12	1,600,000	228,00	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 $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.

Required

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.