Polar Company purchased a building with an expected useful l

Polar Company purchased a building with an expected useful life of 40 years for $650,000 on January 1, 2016. The building is expected to have a residual value of $44,000.

Account Titles and Explanation

Debit

Credit

Account Titles and Explanation

Debit

Credit

Polar Company purchased a building with an expected useful life of 40 years for $650,000 on January 1, 2016. The building is expected to have a residual value of $44,000.

Solution

Depreciation under Straight line method (650000-44000)/40 15150 Account titles and Explanation Debit Credit Building 650,000 cash 650,000 for 2016 Depreciation Depreciation expense 15150 Accumulated depreciation 15150 for 2017 depreciation Depreciation expense 15150 Accumulated depreciation 15150 Double declining method (1/40*2) 5% for 2016 Depreciation Depreciation expense 32500 Accumulated depreciation 32,500 (650000*5%) for 2017 depreciation Depreciation expense 30875 Accumulated depreciation 30,875 (650000-32500)*5%