Question

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On March 31, 2021, Susquehanna Insurance purchased an office building for $12,300,000. Based on their relative falr 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 $1,210,000 and $710,000, 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 Building Furniture and fixtures Office equipment 25 20 10 Residual Value 10% of cost 19% of cost $31,000 Required: Calculate depreciation for 2021 and 2022. (Do not round Intermediate calculations.) Depreciation 2021 2022 Building Furniture and fixtures Office equipment

Answer 1

Under straight line depreciation, the amount of depreciation to be charged each year would be same
Formula to calculate straight line depreciation
Depreciation	(Cost - Residual value)/Estimated useful life
Value of building	$8,200,000	12300000*(2/3)
Residual value	$820,000	8200000*10%
Depreciable value	$7,380,000	(8200000-820000)
Service life	25
Depreciation straight line	$295,200
In 2021, the machine is used for 9 months (April- December) and thus 9 months depreciation would be applicable
Depreciation 2021	$221,400	295200*(9/12)
Thus, for 2021 is $221,400 and for 2022 on building would be $295,200
Calculation of depreciation on furniture and fixtures
Double declining depreciation rate	(1/20)*2
Double declining depreciation rate	10.00%
Cost of furniture and fixtures	$1,210,000
Depreciation 2021	$90,750	1210000*10%*(9/12)		9 month depreciation
Net value at end of 2021	$1,119,250
Depreciation 2022	$111,925	1089000*10%
Net value at end of 2022	$1,007,325
Calculation of depreciation on office equipment
Double declining depreciation rate	(1/10)*2
Double declining depreciation rate	20.00%
Cost of equipment	$710,000
Depreciation 2021	$106,500	710000*20%*(9/12)
Net value at end of 2021	$603,500
Depreciation 2022	$120,700	568000*20%
Net value at end of 2022	$482,800
Summary of depreciation is shown below
	Depreciation
	2021	2022
Building	$221,400	$295,200
Furniture and fixtures	$90,750	$111,925
Office equipment	$106,500	$120,700