Reference no: EM133154987

Question - Accounting for Depreciation on Fixed Assets - Fitzco Inc. purchased a building on January 1st 2002 for $200,000 cash. The building is expected to have a useful life of 40 years and a salvage value of $20,000.

1. Answer the questions that follow assuming that Fitzco uses the straight line method of depreciation on fixed assets.

a. Prepare the journal entry to record the purchase of the building.

b. Calculate annual depreciation expense on the building for the first four years.

Year 1 $200,000*0.20=$40,000

Year 2 ($200,000-40,000) *0.20=$32,000

Year 3 $128,000*0.20=$25,600

Year 4 $102,000*0.20=$20,480

c. Prepare the adjusting entries needed on December 31st 2002, 2003, and 2004.

d. Show the Balance Sheet presentation of the building on December 31st 2002, 2003, 2004.

2. Answer the questions that follow assuming that Fitzco uses the declining balance method of depreciation on fixed assets with a rate of 20%.

a. Prepare the journal entry to record the purchase of the building.

b. Calculate annual depreciation expense on the building for the first four years.

c. Prepare the adjusting entries needed on December 31st 2002, 2003, 2004.

d. Show the Balance Sheet Presentation of the building on December 31st 2002, 2003, and 2004.