Homework SourseFrancisco Corporation is constructing a new building at a to
Francisco Corporation is constructing a new building at a total initial cost of $10,000,000. The building is expected to have a useful life of 50 years with no residual value. The building’s finished surfaces (e.g., roof cover and floor cover) are 5% of this cost and have a useful life of 20 years. Building services systems (e.g., electric, heating, and plumbing) are 20% of the cost and have a useful life of 25 years. The depreciation in the first year using component depreciation, assuming straight-line depreciation with no residual value, is: $200,000. $215,000. $255,000. None of the above.
Solution
Calculate first year depreciation :
so answer is c) $255,000
| 5% of cost of building surfaces (10000000*5%/20) | 25000 |
| 20% of cost of building services systems (10000000*20%/25) | 80000 |
| 75% of cost of building (10000000*75%/50) | 150000 |
| Total depreciation | 255000 |
