Rick, CFO of a half way house, is planning a $26,000,000 acquisition of an unuse
ID: 2765969 • Letter: R
Question
Rick, CFO of a half way house, is planning a $26,000,000 acquisition of an unused hotel on January 1, 2014. It will be depreciated on a straight line basis over the next 26 years. The current facilities of his company, New Life in Christ, purchased another unused hotel when it started business on January 1, 2012 for $52,000,000 and it is also being depreciated on a straight line basis over 26 years. At the end of December 31, 2014, how much of fixed assets will be comprised of these facilities on the Balance Sheet of New Life in Christ? HInt: Calculate how much each building depreciates per year and multiply this figure from the number of years the building has been owned. Subtract the depreciation from the total amount of the facilities.
Explanation / Answer
Answer:
The depreciation amount of unused hotel acquired on January 1, 2014 for 1 year=$26,000,000 / 26 = $1,000,000
The Depreciation amount for 3 years of unused hotel purchased on January 1, 2012 = $52,000,000 / 26 = $2,000,000 x 3 = $6,000,000
Total Value of Hotels = $52,000,000 + $1,000,000 = $53,000,000
Less: Accumulated Depreciation ($6,000,000 + $1,000,000) = $7,000,000
Net Book Value of Asset as on Dec 31, 2014 = $46,000,000
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.