On March 31, 2018, Susquehanna Insurance purchased an office building for $13,80
ID: 2577962 • Letter: O
Question
On March 31, 2018, Susquehanna Insurance purchased an office building for $13,800,000. Based on their relative fair values, one-third of the purchase price was allocated to the land and two-thirds to the building. Furniture and fixtures were purchased separately from office equipment on the same date for $1,260,000 and $760,000, respectively. The company uses the straight-line method to depreciate its buildings and the double-declining-balance method to depreciate all other depreciable assets. The estimated useful lives and residual values of these assets are as follows: Service Life Residual Value Building 25 10% of cost Furniture and fixtures 20 10% of cost Office equipment 10 $36,000 Required: Calculate depreciation for 2018 and 2019. (Do not round intermediate calculations.)
Explanation / Answer
Purchase date = March 31, 2018
Method of Depreciation for Buildings = Straight line
Method of Depreciation for Furniture and fixtures = Double declining balance
Method of Depreciation for Office equipment = Double declining balance
Depreciation under Straight line method = (cost - residual value) / useful life
Depreciation under Double declining balance method = (cost - accumulated depreciation) / useful life * 2
Depreciation for 2018 = 526,400
Depreciation for 2019 = 566,200
Cost Service life Residul value Building 9,200,000 (13,800,000*2/3) 25 920,000 (9,200,000*10%) Furniture and Fixtures 1,260,000 20 126,000 (1,260,000*10%) Office equipment 760,000 10 36,000Related Questions
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