Depreciation expense must be recorded for the month of December. The building wa

Question

Depreciation expense must be recorded for the month of December. The building was purchased on February 1, 2016 for $37,500 with a remaining useful life of 25 years and a salvage value of $3,000.   The method of depreciation for the building is straight-line.   The equipment was purchased on February 1, 2016 for $21,600 with a remaining useful life of 4 years and a salvage value of $1,800. The method of depreciation for the equipment is double-declining balance. Depreciation has been recorded for the building and equipment for months February through November. Depreciation expense must be recorded for the month of December. The building was purchased on February 1, 2016 for $37,500 with a remaining useful life of 25 years and a salvage value of $3,000.   The method of depreciation for the building is straight-line.   The equipment was purchased on February 1, 2016 for $21,600 with a remaining useful life of 4 years and a salvage value of $1,800. The method of depreciation for the equipment is double-declining balance. Depreciation has been recorded for the building and equipment for months February through November.

Explanation / Answer

Calculation of Depreciation on Building :- (Straight Line Method)

Depreciation = (Cost - Salvage Value) / Life of Building

= ($37500-$3000) / 25

= $1380 Per year

Depreciation (Feb. to Nov.) = $1380 * (10/12) = $1150

Depreciation for Equipment :- (Double Decline Rate)

Straight Line Dep. = ($21600 - $1800) / 4

= $4950

Straight Line Rate = $4950*100 / 19800 = 25%

Double Line Rate = 25*2 = 50%

Depreciation (Feb to Nov.) = $21600 * 50% * (10/12)

Dep. = $9000

Total Depreciation (Feb to Nov.) = $9000 + $1150

= $10150

December month Depreciation = ($1380 / 12) + ($21600*50%*(1/12))

= $115 + $900

= $1015

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