connect ACCOUNTING Chapter 11 Homework 2 00 polimts value At

connect ACCOUNTING Chapter 11 Homework 2. 00 polimts value At the beginning of 2014, Robotics Inc. acquired a manufacturing faclity for $13.3 million. $10.3 milion of the purchase price was allocated to the building. Depreciation for 2014 and 2015 was calculated using the straight-line method, a 25-year useful life, and a $2.3 million residual value. In 2016, the estimates of useful life and residual value were changed to 20 years and $630,000, respectively What is depreciation on the building for 2016? (Enter your answer in whole dollars.) Reterences eBook&Resources; Worksheet Difficulty 2 Medium

Solution

Purchase price allocated to builiding = 10.3 million

Resale value = 2.3 million

Useful life = 25 years

Straight line depreciation for 2014 and 2015 = (Cost price - Scrap value) / Useful life of asset

= (10.3 million - 2.3 million) / 25 = 8 million / 25 = 0.32 million

Book Value of building at thd end of 2015 = 10.3 million - (0.32*2)million = 10.3 - 0.64 = 9.66 million

Revised residual value = 0.63 million

Revised useful life = 20 years

Depreciation on the building for 2016 = (Book Value - Scrap value) / Useful life of asset

= (9.66 - 0.63)/20 = 0.4515 million i.e. 451500

Depreciation on the building for 2016 is $451500.