Northlake Nordic Centre Inc.’s lodge (Building: cost 610,000, residual 70,000, 40 years, straight-line) has been amortised for five full years at 13,500 a year. A survey now estimates 30 years of remaining life and a residual value of 62,500. Record the sixth year’s amortization at 31 December.
Northlake Nordic Centre Inc.’s lodge (Building: cost 610,000, residual 70,000, 40 years, straight-line) has been amortised for five full years at 13,500 a year. A survey now estimates 30 years of remaining life and a residual value of 62,500. Record the sixth year’s amortization at 31 December.
Answer
Dr Amortization Expense 16000; Cr Accumulated Amortization – Building 16000
Accounts - Amortization Expense - Accumulated Amortization – Building - Building - Retained Earnings - Cash Carrying amount 610,000 − 67,500 = 542,500; (542,500 − 62,500) ÷ 30 = **16,000**: **Amortization Expense** (debit), **Accumulated Amortization – Building** (credit). The traps are 13,500 (the unrevised charge) and a catch-up to **Retained Earnings** — a change in estimate is prospective and restates nothing.
Hermanson Vol 1 ch 10 (partial-year amortization; revising the estimate); Lyryx Intermediate FA Vol 1 §10.2.5–10.2.6; Dauderis & Annand §8.3–8.4 (concept map K8–K9)