Ask Question
1 January, 19:19

Masterson Supply purchased a small storage building for $20,000 to be used over a five-year period. The building has no residual value. Early in the fourth year, the storage building burned down. Record the retirement of the remaining book value of the storage building.

+2
Answers (1)
  1. 1 January, 19:45
    0
    Debit: Accumulated Depreciation = $12,000

    Debit: Loss on storage building = $8000

    Credit: Storage building = $20,000

    Explanation:

    Assuming that a straight-line depreciation method is used ...

    Straight-line depreciation is when the same amount is depreciation every year for the life of the asset. It is calculated as:

    (Cost of asset - residual value) / number of useful life

    Depreciation per year = (20,000 - 0) / 5 = $4000

    For 3 years, the asset would have depreciated a total of 3 x $4000 = $12,000

    Its net book value as the time of fire being $20,000 - $12,000 = $8,000

    The building being burned down is a loss on storage building. Hence, the asset and its accumulated depreciation would have to be written-off the books and recorded as a loss incurred ...

    Recording entries:

    Debit: Accumulated Depreciation = $12,000

    Debit: Loss on storage building = $8000

    Credit: Storage building = $20,000
Know the Answer?
Not Sure About the Answer?
Find an answer to your question 👍 “Masterson Supply purchased a small storage building for $20,000 to be used over a five-year period. The building has no residual value. ...” in 📗 Business if the answers seem to be not correct or there’s no answer. Try a smart search to find answers to similar questions.
Search for Other Answers