On January 1, 2023, the accounting records of Indigo Ltée included a debit balance of $15 million in the Building account and of $12 million in the related Accumulated Depreciation account. The building was purchased in January 1983 for $15 million, and was estimated to have a 50-year useful life with no residual value. Indigo uses the straight-line depreciation method for all of its property. plant, and equipment. During 2023, the following expenditures relating to the building were made: 1. 2. 3. 4. The original roof of the building was removed and replaced with a new roof. The old roof cost $1.8 million. The new roof cost $4.50 million and is expected to have a 10 10-year useful life. The ongoing frequentrepairs on the building during the year cost $55,000. The building's old heating system was replaced with a new one. The new HVAC cost $812.000 and is estimated to have a seven-year useful life and no residual value. The cost of the old HVAC is unknown, but is estimated to be $200,000 and fully depreciated. A natural gas explosion caused $58,000 of uninsured damage to the building. This major repair did not change the estimated useful life of the building or its residual value. Prepare the journal entries to record the expenditures related to the building during 2023. (Credit account titles are automatically Indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries.)
On January 1, 2023, the accounting records of Indigo Ltée included a debit balance of $15 million in the Building account and of $12 million in the related Accumulated Depreciation account. The building was purchased in January 1983 for $15 million, and was estimated to have a 50-year useful life with no residual value. Indigo uses the straight-line depreciation method for all of its property. plant, and equipment. During 2023, the following expenditures relating to the building were made: 1. 2. 3. 4. The original roof of the building was removed and replaced with a new roof. The old roof cost $1.8 million. The new roof cost $4.50 million and is expected to have a 10 10-year useful life. The ongoing frequentrepairs on the building during the year cost $55,000. The building's old heating system was replaced with a new one. The new HVAC cost $812.000 and is estimated to have a seven-year useful life and no residual value. The cost of the old HVAC is unknown, but is estimated to be $200,000 and fully depreciated. A natural gas explosion caused $58,000 of uninsured damage to the building. This major repair did not change the estimated useful life of the building or its residual value. Prepare the journal entries to record the expenditures related to the building during 2023. (Credit account titles are automatically Indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter O for the amounts. List all debit entries before credit entries.)
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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Transcribed Image Text:Prepare the journal entries to record the expenditures related to the building during 2023. (Credit account titles are automatically
Indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry for the account titles and enter O for the
amounts. List all debit entries before credit entries)
No. Account Titles and Explanation
1.
2.
3.
(Purchase of new roo
(Disposal of old roof)
(Purchase of HVAC)
2.
3.
4.
(Disposal of old roof)
(Purchase of HVAC)
4
(Disposal of old HVAC)
Debit
Credit
NI
Transcribed Image Text:On January 1, 2023, the accounting records of Indigo Ltée included a debit balance of $15 million in the Building account and of $12
million in the related Accumulated Depreciation account. The building was purchased in January 1983 for $15 million, and was
estimated to have a 50-year useful life with no residual value. Indigo uses the straight-line depreciation method for all of its property.
plant, and equipment. During 2023, the following expenditures relating to the building were made:
1.
2.
3.
4.
The original roof of the building was removed and replaced with a new roof. The old roof cost $1.8 million. The new roof cost
$4.50 million and is expected to have a 10-year useful life.
The ongoing frequent repairs on the building during the year cost $55,000.
The building's old heating system was replaced with a new one. The new HVAC cost $812.000 and is estimated to have a
seven-year useful life and no residual value. The cost of the old HVAC is unknown, but is estimated to be $200,000 and fully
depreciated.
1.
A natural gas explosion caused $58,000 of uninsured damage to the building. This major repair did not change the estimated
useful life of the building or its residual value.
Prepare the journal entries to record the expenditures related to the building during 2023. (Credit account titles are automatically
Indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry for the account titles and enter O for the
amounts. List all debit entries before credit entries.)
No. Account Titles and Explanation
(Purchase of new roof)
Debit
Credit
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