Homework Answers
Cost of building = $3,500,000
Residual value = $175,000
Useful life = 20 years
Annual depreciation of building = (Cost of building - Residual value)/Useful life
= (3,500,000 - 175,000)/20
= $166,250
Cost of addition = $1,610,000
Addition was made on June 30, 2018, Hence remaining useful life of addition is 17.5 years
Annual depreciation of addition = Cost of addition/Useful life
= 1,610,000/17.5
= $92,000
Depreciation of addition for year 2018 = Annual depreciation x 6/12
= 92,000 x 6/12
= $46,000
| Depreciation | ||
| Year | Building | Addition |
| 2018 | 166,250 | 46,000 |
| 2019 | 166,250 | 92,000 |
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