Revision of Depreciation
A building with a cost of $540,000 has an estimated residual value of $108,000, has an estimated useful life of 18 years, and is depreciated by the straight-line method.
a. What is the amount of the annual
depreciation? Do not round intermediate calculations.
$
b. What is the book value at the end of the
tenth year of use?
$
c. If at the start of the eleventh year it is
estimated that the remaining life is 10 years and that the residual
value is $20,000, what is the depreciation expense for each of the
remaining 10 years?
$
Part a)
Annual depreciation
= (value of building - Residual value)÷life in years
= (540000- 108000) ÷ 18
= $ 24000
Part b)
Book value at the end of 10 year = cost - accumulated depreciation
= $540000 - (10×24000)
= $ 300000
Part c)
Depreciation for remaining 10 years
= ( carrying value of building - salvage value) ÷ 10
= ($300000 - 20000) ÷ 10
= $ 28000
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