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Q1) Merton Company bought a building at a cost of $364,000 on January 1, 2006. Merton estimated that building's life would be 25 years and residual value at the end of 25 years would be $14,000.

On January 1, 2007, company made several expenditures related to building. Entire building was painted and floors were refinished at cost of $21,000. Federal agency need Merton to install additional pollution-control devices in building at cost of $42,000. With new devices, Merton believed it was possible to extend life of building by additional six years.

In 2008 Merton altered its corporate strategy dramatically. Company sold building on April 1, 2008, for $392,000 in cash and relocated all operations in another state.

Find out amount of depreciation which must be reflected on income statement for 2006 and 2007.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M920846

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