Question

In its first year of bensiness, Chal Board purchased land, a bulding and equipment on March 5, 2020, for $650,000 in total. The land was valued at $275.000, the building at $343.750 and the equipment at $68,750. Additional information on the depreciable assets follows: Asset Residual Value Useful Life in Years Building $25,000 60 Equipment 5.000 Depreciation Method Straight line Double diminishing-balance Your a wer is incorrect Allocate the purchase cost of the land, building and equipment to each of the sets Land Buildings Equipment 5 e Textbook and Media Your answer is incorrect Chalkboard has a December 31 fiscal year end and is trying to decide how to calon depreciation for assets purchased during their Calculate deprecan expense for the building and equipment for 2020 and 2021 29ming depreciation and to the nearest month Round s to decimo places 5275 2020 2021 El 5 Eauments

Answer 1

Answer Allocation of cost of the_lend, building and equipment Total Fgir Value of Assets = Land + Bijelding t Equipment los $ (275000 + 843780 +68750) nebo $ 687500din $ 650000 d o Total Purchgie cost of all three qusets Difference in Purchase = $ 687.00 - $ 650000 = $37500 . كوو ده) عواو كاول Allocation fair value to the of difference in Purch que cost and Fair Value of Assets a 6 Awit c5 37500 Sub X 100 d = 37500xc fgiv Value 1 % in difference Difference of Asset I of Purchase ani Full Uglie e:b-d Ryrchase call of Asset Լազմ | 273000 Building | 343750 Bquiemeth 68750 687500 40% 50% 10% 260000 325000 15000 | 18750 3750 65000 Ooooo

2 Glutation of Depreciation Expense assum199 gevestu bo the month (9) _B4311094 Giver, Purchase cost $ 325000 Salugge Value $ 25000 lados As Useful Lite to Liso yegys, 161 Methods of Deprecytion Straight Line Method." l | I ol under the straight line method, Depreciation is calculated by purchase cost divñinished by solvage cast divided by the usefy) lie. X a Por Depreciation Center for shaight line Methel) purchase Cost Salugge Valye Useful life. lis Deprec191409 og Byblog Los Deme clation on Building for 2020 325000 - 25000 x 10 = $4167 .co years 12 Du n ia Deneciation on Building = $ 5000, 325000 - 25000 1 60 years for 2027 (b) Equipment good given Purcharel est Salvage Value Vsefyd tile Methed of Depreciation $65000 ling $ 500 8 yours Doyble Declining 81199ce. un der Double Declining Bal99ce method, depreciation is calculate/ on_qesleytion. It is ilylated on double role of shqight line depreciation rate of the carrying value of quet,

Depreciation lynder Double - Har Decligias Balance) Grrying Value X 2 X of Asset Straight line - Peyte H ille otline ap online carrying Valuel W.2X lille t w o of asset :) shorts Useful life t Vivi. Depreciation lon Equipment in 61000 x 2X11 W lub for 2020 nolly na dno 8 years X 10 =$13542 Iz 1 x Deprecistion on Equipment i = ( 63000 - X2 X 1 - 2 for 202) 13542) i 8 years = $ 17865 Schelyle of depreciation Gif coluylated at nequest month) - Particulars 2020 2021 Building S 4167 21 11 3542 1pc 5000 12865 Equipment į Caloyd Hon of Depreciation assuming half yeau depreciation is recorded - பேயடி lovine Debreciation for 2020 = 1/325000 - 25000 86 . $2500 o la jolov in 102,0) 60 years or 1,1321) 321000 , $ 5000 overstion ation for 2021 1 is for 2021 / 325000 1,25000 60 years

_(b) Equipment Depreciation for 2020 - 65000 X2X1 XG$8125 12 . - 8 years Depreciation for 2011 - ° $14213 65000-1X 2 X 1 8125) Cyes ts Schedule of Depreciation of claylated half year in acquishipa yen Particulars 2020 2021 - 2500 5000 Building Equipment 8/25 14219 4 Determington of which policy_of which should be faillow in yeu acquisibos According to me, both the options are very precise. It depends upon the consisten y principle Chalkboard should maintln consisteny praciple of accountany throughout the useful life of an asset for long run asset like building the company shoull follow method of depreciation is recorded half year spring the acquisition - for short an asset like equipment, the company should follow method of depreciation is recorded from the nequest nooth en Depreciation will not be charged on the land !