e9 4 will smith the new controller of fresh prince company has reviewed the expected 459476

E9-4 Will Smith, the new controller of Fresh Prince Company, has reviewed the expected

useful lives and salvage values of selected depreciable assets at the beginning of

2007. Here are his findings:

Accumulated Useful Life

Type of Date Depreciation, (in years) Salvage Value

Asset Acquired Cost Jan. 1, 2007 Old Proposed Old Proposed

Building Jan. 1, 1999 $900,000 $172,000 40 50 $40,000 $47,600

Warehouse Jan. 1, 2001 120,000 27,600 25 20 5,000 3,600

Determine straight-line depreciation

All assets are depreciated by the straight-line method. Fresh Prince Company uses a calendar

year in preparing annual financial statements. After discussion, management has

agreed to accept Will’s proposed changes. (The “Proposed” useful life is total life, not remaining

life.)

Instructions

(a) Compute the revised annual depreciation on each asset in 2007. (Show computations.)

(b) Prepare the entry (or entries) to record depreciation on the building in 2007.