On January 1, 2006, the Rita Company purchased for $80, 000 a building that was expected to have a 20-year useful life with no residual value at the end of its useful life.The straight-line method of depreciation was used.On January 1, 2012, Rita Company determined that the remaining life of the building was four years, and there was no change in residual value.What is the balance in Accumulated Depreciation: Building at December 31, 2012, assuming that Rita properly accounted for the change?
A)$14, 000
B)$28, 000
C)$38, 000
D)$56, 000

Question

Quizplus · Accepted Answer

The total depreciable cost of the building was $80,000. Since the useful life of the building was 20 years, the annual depreciation expense was $4,000 ($80,000 ÷ 20). By January 1, 2012, the building had been depreciated for 6 years, resulting in accumulated depreciation of $24,000 ($4,000 × 6).
When Rita Company determined that the remaining life of the building was four years, they still had to depreciate $16,000 ($80,000 - $24,000 - $40,000) over the remaining four years. Therefore, the annual depreciation expense was $4,000 per year. The balance in accumulated depreciation at December 31, 2012, was $38,000 ($24,000 + ($4,000 × 2)). Hence, the answer is choice C.

On January 1, 2006, the Rita Company Purchased for $80