Give step-by-step solution with explanation and final answer:
In 1998, Sheffield Company completed the construction of a building at a cost of $2,340,000 and first occupied it in January 1999. It was

Question

Give step-by-step solution with explanation and final answer: 
In 1998, Sheffield Company completed the construction of a building at a cost of $2,340,000 and first occupied it in January 1999. It was estimated that the building will have a useful life of 40 years and a salvage value of $69,600 at the end of that time.

Early in 2009, an addition to the building was constructed at a cost of $585,000. At that time, it was estimated that the remaining life of the building would be, as originally estimated, an additional 30 years, and that the addition would have a life of 30 years and a salvage value of $23,400.

In 2027, it is determined that the probable life of the building and addition will extend to the end of 2058, or 20 years beyond the original estimate.

(a)

Your answer is correct.

Using the straight-line method, compute the annual depreciation that would have been charged from 1999 through 2008.

Annual depreciation from 1999 through 2008__
Compute the annual depreciation that would have been charged from 2009 through 2026.

Annual depreciation from 2009 through 2026 $___

VIPSolutions · Accepted Answer

Let's solve the problem step by step.

---

**Step 1: Depreciation from 1999 through 2008 (Original Building)**

- **Cost of building:** $2,340,000  
- **Estimated life:** 40 years  
- **Salvage value:** $69,600

**Straight-line Depreciation Formula:**  
$$
\text{Annual Depreciation} = \frac{\text{Cost} - \text{Salvage Value}}{\text{Useful Life}}
$$

$$
\text{Annual Depreciation} = \frac{2,340,000 - 69,600}{40} = \frac{2,270,400}{40} = \$56,760
$$

**Answer:**  
**Annual depreciation from 1999 through 2008 = \$56,760**

---

**Step 2: Depreciation from 2009 through 2026 (Building + Addition)**

**First, calculate accumulated depreciation for the building by end of 2008:**

- Years depreciated: 1999–2008 = **10 years**
- Accumulated depreciation: $10 \times \$56,760 = \$567,600$
- Book value at end of 2008: $2,340,000 - 567,600 = \$1,772,400$

**In 2009:**  
- **Addition cost:** $585,000  
- **Addition's useful life:** 30 years  
- **Addition's salvage value:** $23,400

**At the start of 2009:**
- **Building:** Remaining life = 30 years, Salvage = $69,600  
- **Addition:** Life = 30 years, Salvage = $23,400

**Depreciation for Building (from 2009):**
$$
\text{Annual Depreciation (Building)} = \frac{1,772,400 - 69,600}{30} = \frac{1,702,800}{30} = \$56,760
$$

**Depreciation for Addition:**
$$
\text{Annual Depreciation (Addition)} = \frac{585,000 - 23,400}{30} = \frac{561,600}{30} = \$18,720
$$

$$
\text{Total Annual Depreciation (2009-2026)} = \$56,760 + \$18,720 = \$75,480
$$

---

### **Final Answers**

#### **Annual depreciation from 1999 through 2008:**
$$
\boxed{\$56,760}
$$

#### **Annual depreciation from 2009 through 2026:**
$$
\boxed{\$75,480}
$$

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