Q1A building with a cost of $500,000, an estimated residual value of $50,000, an

Question

Q1A building with a cost of $500,000, an estimated residual value of $50,000, and an estimated life of 20 years was depreciated by the straight-line method for 10 years. In the eleventh year, it was determined that the useful life should be extended by a further 10 years, and the residual value amended to $100 000. The yearly depreciation expense for the remainder of the asset's life will be:$8750

Suppose the equipment described in Question 1 above is to be depreciated by the reducing balance (at twice the straight-line rate) method. What is the amount of depreciation for the first full year?

$40,000

$85,000

$75,000

$80,000

$40,000

$85,000

$75,000

$80,000

Explanation / Answer

Option A $40,000 is correct

explanation

First calculate depreciation = asset -scarp /estimated life

=$500,000-$50000/20=$22500

Second calculate straight line Depreciation rate  

=22500/450000*100=5 percent  

Suppose the equipment depreciated by deducing balance method twice the straight line rate is

5percent *2= 10 percent

So at 11 th year company company determined that the life of an assets further extended by a 10years

And residual value is $100,000  

Depreciable asset = 500,000-100,000 =$400,000 depreciation =depreciable asset *10/100

= 400,000*10/100=$40,000

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