On January 1, 2003, ABC co. purchased a building and machinery that have the following useful lives, salvage value, and costs
Building, 25-year estimated useful life, $4,000,000 cost, $400,000 salvage value........
-Machinery, 10 year estimated useful life, $500,000 cost, no salvage value.
The building has been depreciated under the straight line method through 2007.In 2008, the company decided to switch to the double declining balance method of depreciation for the building. ABC also decided to change the total useful life of the machinery to 8 years, with a salvage value of $25,000 at the end of that time. The machinery is depreciated using the straight line method.
a) Prepare the journal entry necessary to record the depreciation expense on the building in 2008
b) Compute depreciation expense on the machinery for 2008
This solution contains explanations on how to compute depreciation expense for machinery.