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Exercise 11.13: Depreciation.
Facts: Heilbach Ltd. constructed a building for use by the administration section of the company. The completion date was 1st July 2007, 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 amount to $15,000. In December 2013, following severe weather in the city, the roof of the administration of the building was considered to be in poor shape so the company decided to replace it. On 1st July 2014, a new roof was installed at a cost of 220,000. The new roof was of different material to the old roof, which was estimated to have cost of only 140,000 in the original construction, although at the time of the construction it was thought that the roof would 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 would delay construction of a new building, thereby extending the original life of the building from 20 years to 25 years.
Required: Journal entries? (The entity does not apply component approach.
Questions:
1. Mình lúng túng bút toán xử lý giá trị còn lại của Roof như thê nào khi thay thế New Roof vì doanh nghiệp áp dụng single approach?
2. 15,000 cost of demolition phải được qui sang PV at acquisition date và capitalized into the construction?. Vì bài ko đề cập đến interest rate nên mình giả sử r = 3% và hạch toán:
1-7-2007: Capitalization of demolition amount at acquisition date of 1-7-2007:
Dr Construction 8,305 (= 15,000 : (1.03)²0)
Cr Provision 8,305
30-6-2008: Unwinding interest:
Dr Expense: Interest
Cr Provision: 249
Nhờ các bạn dành thời gian suy ngẫm và giúp đỡ.
Facts: Heilbach Ltd. constructed a building for use by the administration section of the company. The completion date was 1st July 2007, 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 amount to $15,000. In December 2013, following severe weather in the city, the roof of the administration of the building was considered to be in poor shape so the company decided to replace it. On 1st July 2014, a new roof was installed at a cost of 220,000. The new roof was of different material to the old roof, which was estimated to have cost of only 140,000 in the original construction, although at the time of the construction it was thought that the roof would 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 would delay construction of a new building, thereby extending the original life of the building from 20 years to 25 years.
Required: Journal entries? (The entity does not apply component approach.
Questions:
1. Mình lúng túng bút toán xử lý giá trị còn lại của Roof như thê nào khi thay thế New Roof vì doanh nghiệp áp dụng single approach?
2. 15,000 cost of demolition phải được qui sang PV at acquisition date và capitalized into the construction?. Vì bài ko đề cập đến interest rate nên mình giả sử r = 3% và hạch toán:
1-7-2007: Capitalization of demolition amount at acquisition date of 1-7-2007:
Dr Construction 8,305 (= 15,000 : (1.03)²0)
Cr Provision 8,305
30-6-2008: Unwinding interest:
Dr Expense: Interest
Cr Provision: 249
Nhờ các bạn dành thời gian suy ngẫm và giúp đỡ.
