Francisco Corporation is constructing a new building at a total initial cost of

Question

Francisco Corporation is constructing a new building at a total initial cost of $10,000,000. The building is expected to have a useful life of 50 years with no residual value. The building’s finished surfaces (e.g., roof cover and floor cover) are 5% of this cost and have a useful life of 20 years. Building services systems (e.g., electric, heating, and plumbing) are 20% of the cost and have a useful life of 25 years. The depreciation in the first year using component depreciation, assuming straight-line depreciation with no residual value, is: $200,000. $215,000. $255,000. None of the above.

Explanation / Answer

Calculate first year depreciation :

so answer is c) $255,000

5% of cost of building surfaces (10000000*5%/20) 25000 20% of cost of building services systems (10000000*20%/25) 80000 75% of cost of building (10000000*75%/50) 150000 Total depreciation 255000

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