On March 31, 2016, Susquehanna Insurance purchased an office building for $10,200,000. 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 $1,300,000 and $800,000, 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 5% of cost Furniture and fixtures 10 5% of cost Office equipment 5 $40,000 Calculate depreciation for 2016 and 2017.

Answers 2

Answer:

2016 = $628,800

2017 = $903,000

Explanation:

Step 1 : Determine the Cost of the Assets

Land = 1/3 x $10,200,000 = $3,400,000

Buildings = 2/3 x $10,200,000 = $6,800,000

Furniture and fixtures = $1,300,000

Office equipment = $800,000

Step 2 : Determine the Depreciation expenses for individual assets

Land

Land is not depreciated we call it a non-depreciable asset. Hence no depreciation charge for this asset.

Buildings

Straight line method is used to depreciate Buildings. Straight line method charges a fixed amount of depreciation.

Depreciation Expense = (Cost - Residual Value) ÷ Useful life

Annual depreciation = ($6,800,000 - $340,000) ÷ 25 = $258,400

2016 :

Machine is only available for use from April to December, hence 9 months depreciation not full year depreciation.

Depreciation expense = $258,400 x 9/12 = $193,800

2017 :

A full year`s depreciation can be charged

Depreciation expense = $258,400

Furniture and fixtures

The double-declining-balance method is being used.

Deprecation expense = 2 x SLDP x BVSLDP

where,

SLDP = 100 ÷ 10 = 10%

2016 :

Annual Depreciation expense = 2 x $1,300,000 x 10% = $260,000

Allow for only 9 months depreciation, hence depreciation expense will be :

Depreciation expense = $260,000 x 9/12 = $195,000

2017 :

Provide for a full year`s depreciation.

Annual Depreciation expense = 2 x ($1,300,000 - $195,000) x 10% = $221,000

Office equipment

The double-declining-balance method is being used.

Deprecation expense = 2 x SLDP x BVSLDP

where,

SLDP = 100 ÷ 5 = 20%

2016 :

Annual Depreciation expense = 2 x $800,000 x 20% = $320,000

Allow for only 9 months depreciation, hence depreciation expense will be :

Depreciation expense = $320,000 x 9/12 = $240,000

2017 :

Provide for a full year`s depreciation.

Annual Depreciation expense = 2 x ($1,300,000 - $240,000) x 20% = $424,000

Step 3 ; Calculate Total Depreciation

2016 :

Depreciation expense = $193,800 + $195,000 + $240,000 = $628,800

2017 :

Depreciation expense = $258,400 + $221,000 + $424,000 = $903,000

AI generated Answer

. 2016 Building: $10,200,000 x 2/3 = $6,800,000 / 25 years = $272,000 Furniture and Fixtures: $1,300,000 x 10 years = $130,000 Office Equipment: $800,000 x (2 x 0.5) = $800,000 x 1 = $800,000 Total depreciation for 2016: $272,000 + $130,000 + $800,000 = $1,202,000 2017 Building: $10,200,000 x 2/3 = $6,800,000 / 25 years = $272,000 Furniture and Fixtures: $1,300,000 x (2 x 0.5) = $1,300,000 x 1 = $1,300,000 Office Equipment: $800,000 x (2 x 0.5 x 0.5) = $800,000 x 0.5 = $400,000 Total depreciation for 2017: $272,000 + $1,300,000 + $400,000 = $1,972,000
  • Rate an answer:

Do you know an answer? Add it here!

Can't find the answer?

Unable to find an answer to your question?

Don't worry! There are several alternative approaches you can try to resolve your query. Here are some tips to help you find answers in different ways:

  1. Reframe your question: Sometimes, the way you phrase your question can limit your search results. Try rephrasing it using different keywords or providing more context to get better results.
  2. Utilize social media: Post your question on social media platforms, particularly those focused on professional or specialized topics. Twitter, LinkedIn, and Facebook groups can connect you with individuals who may have relevant expertise or experiences to share.
  3. Consult subject matter experts: Reach out to experts in the field related to your question. Many professionals are willing to help and share their knowledge. You can connect with them through email, LinkedIn messages, or by attending relevant conferences or events.
  4. Use our website to find your question through the search box above, or you can sign up to ask your question for our big educational community. Our experts will review your question, and you will get a quick and quality answer.
  5. Collaborate with others: If your question is related to a specific project or problem, consider collaborating with others who might have complementary skills or knowledge. Teamwork can lead to innovative solutions and shared insights.

Remember, the process of finding answers often involves persistence, creativity, and an open mind. By exploring various resources, reaching out to others, and being proactive in your search, you increase your chances of finding the information you need. Happy quest for knowledge!

Login with Google

or

Forgot your password?

I don't have an account, I want to Register

Choose a language and a region
How much to ban the user?
1 hour 1 day 100 years