Help me please At the beginning of 2016 Robotics Inc acquire

Help me please...

At the beginning of 2016, Robotics Inc. acquired a manufacturing facility for $12.8 million. $9.8 million of the purchase price was allocated to the building. Depreciation for 2016 and 2017 was calculated using the straight-line method, a 25-year useful life, and a $1.8 million residual value. In 2018, the estimates of useful life and residual value were changed to 20 total years and $580,000, respectively.

What is depreciation on the building for 2018?

Thank you!

Solution

Solution: Calculation of depreciation on the building for 2018:

Purchase price of the building = $9,800,000

Depreciation on the building for 2 years (i.e. for 2016 and 2017) =[(9800000-1800000)/25]*2

= $640,000

Therefore, value of the building at the beginning of 2018 = 9800000-640000 = $9,160,000

Now, Depreciation on the building for 2018

= (9160000-580000)/(20-2)

= 8580000/18 = $476,667