Reference no: EM133572

Question :

Hobart Ltd creates a building for use by the administration section of the company. The completion date was 1 July 2005, and the construction cost was $ 840 000. The company expected to remain in the building for the next 20 years, at which time the building would probably have no real salvage value and have to be demolished. It is expected that demolition costs will amout to real salvage value and have to be demolished. It is expected that demolition costs will amout to $15 000. In December 2011, following some severe Weather in the city, the roof of the administration building was considered to be in poor shape so the company decided to replace it . On 1 July 2012, a new roof was installed at a cost of $220 000. The new roof was of a different material to the old roof, which was estimated to have cost only $ 140 000 in the original construction, though at the time of construction it was thought that the roof could last for the 20 years that the company expected to use the building. Because the company had spent the money replacing the roof, it thought that it could delay construction of a new building, thereby extending the original life of the building from 20 years to 25 years.

Show how you would account for the reduction of the building and how the replacement of the roof would affect the depreciation calculations about 600 words