pter 11 Homework Question 2 (of 10 value 5.00 points At the beginning of 2014, R
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pter 11 Homework Question 2 (of 10 value 5.00 points At the beginning of 2014, Robotics Inc. acquired a manufacturing facility for $13.3 million. $10.3 million 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.) epreciation 45,150Explanation / Answer
Depreciation amount charged for 2014 and 2015:
As per straight line depreciation:
($10.3 million - $2.3 million) ÷ 25 years = $0.32 million = $320,000
Total depreciation charged in 2014 and 2015 = $320,000 x 2 = $640,000
Carrying value at the beginning of 2016 = $10,300,000 - $640,000 = $9,660,000
Salvage value at the end of 20 years from 2014 = $630,000
Remaining estimated life of the asset = 20 years - 2 years = 18 years
Depreciation on building for 2016 =
(9,660,000 - $630,000) ÷ 18 years = $501,666.67
New depreciation would be $501,666.67.
Alternatively, if remaining useful life was 20 years from 2016,
the depreciation amount would be,
(9,660,000 - $630,000) ÷ 20 years = $451,500 per year.
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