15 the end of its useful life. Compute depreciation expense for this asset for 2
ID: 2437254 • Letter: 1
Question
15 the end of its useful life. Compute depreciation expense for this asset for 2013,2014, and 20 a. b. c. straight-line method. double-declining-balance method Assume that on ssume that on January 2, 2015, Lambert revised its estimate of the useful life to changed its estimate of the residual value to $10,000. What effect would this have on denre years n expense in 2015 for each of the above depreciation methods? Computing Depreciation and Accounting for a Change of Estimate In January 2015, Sai Kung & Company paid $8 500,000 for land and a building. An appraisal est mated that the land had a fair value of $2,500,000 and the building was worth $6,000,000. Sai Kung & Company estimated that the useful life of the building was 30 years, with no residual value. E8-28. Calculate annual depreciation expense using the straight-line method. Calculate depreciation for 2015 and 2016 using the double-declining-balance method. Assume that in 2017, Sai Kung & Company changed its estimate of the useful life of the build ing to 25 years. If the company is using the double-declining-balance method of depreciation. h. c. hat amount of depreciation expense would Sai Kung & Company record in 2017? 8 8-29. Estimating the Percent Depreciated The property and equipment footnote from t he Koala & Company balance sheet follows (S millions) PROPERTY AND DEPRECIATION A summary of property and equipment at October 31, 2015, in millions of Australian dollars follows: Useful Lives Years) 201 121 Buildings and building equipment . Machiner and oquin . . . .Explanation / Answer
E8-28.
Depreciation expense will be calculated only for the building because land is a non-depreciable asset.
a.
Annual depreciation expense using straight-line
= Cost of building x 1/Useful life
= $6,000,000 x 1/30
= $200,000
b.
Depreciation for 2015 using double-declining
= Cost of building x 2/Useful life
= $6,000,000 x 2/30
= $400,000
Depreciation for 2016 using double-declining
= ($6,000,000 - $400,000) x 2/30
= $373,333
c.
Book value of the building at the end of 2016 = $6,000,000 - $400,000 - $373,333 = $5,226,667
Depreciation for 2017 using double-declining when useful life is changed to 25 years
= Book value at the end of 2016 x 2/Useful life
= $5,226,667 x 2/(25-2)
= $454,492.78
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