Horizon Company owns a building that appears on its prior year-end balance sheet at its original $594,000 cost less $475,200 accumulated depreciation. The building is depreciated on a straight-line basis assuming a 20-year life and no salvage value. During the first week in January of the current calendar year, major structural repairs are completed on the building at a $71,153 cost. The repairs extend its useful life for 7 years beyond the 20 years originally estimated.


What is the Annual depreciation
and the age of the building?

You take the beginning of the year book value plus the cost of the structural repairs = new book value minus salvage value = depreciable base, which is divided by the remaining useful life of the building = Depreciation for each year.

To calculate the age of the building you take the cost minus salvage value = original depreciation cost per year, then take accumulated depreciation divided by the depreciation for each year = years of the building

You take the beginning of the year book value plus the cost of the structual repairs = new book value minus salvage value = depreciable base, which is divided by the remaining useful life of the building = Depreciation for each year.

To calculate the age of the building you take the cost minus salvage value = orginal depreciation cost per year, then take accumulated depreciation divided by the depreciation for each year = years of the building

I still am having a hard time calculating this. What is the beginning of the year book value for this building, can you help me figure that out?

the beginning book value = Cost minus Accumulated Depreciation.

the begining book value = Cost minus Accumulated Depreciation.

Beginning book value is $118800. So what I did was take $594,000 - $475200.

The remaining book value at the beginning of the year is $118,800

Now you will divide this number by the annual depreciation to get the remaining useful life of the building, which is 4 years. Or you can use the accumulated depreciation divided by the depreciation to get the number of years that you have had the building, which is 16 years.

Step 1. calculate annual Depreciation by taking Cost minus Salvage value, then divide this number by number of years of useful life = annual depreciation.

Step 2. Calculate the life of the asset. There are 2 ways to do this. 1st way take the accumulated Depreciation divided by the annual depreciation = number of years used. 2nd way is take the remaining book value (Cost minus Accumulated Depreciation) divided by the annual depreciation = remaining useful life.

Step 3. Add cost of structural repairs to the cost of the building = new cost of building. Also you can add the cost of structural repiars to the net book value to calculate the new reamining book value.

Step 4. You need to calculate new annual depreciation. Old useful life = 20 years plus the extended life = 27 years. The new remaining useful life is 11 years (27 years useful life minus 16 used used).

Step 5. Calculate new annual depreciation by taking the new remaining book value from step 3 minus salvage value = new depreciable base. Take this number and divide by the new remaining useful life of 11 years = new annual depreciation.