COMPUTATION OF COST, DEPRECIABLE VALUE AND YEARLY DEPRECIATION EXPENSE OF BUILDING :
COST | $476640 |
SALVAGE VALUE | $27000 |
DEPRECIABLE COST | $449640 |
DEPRECIABLE LIFE | 15 years |
YEARLY DEPRECIATION EXPENSE | $29976 |
It was given that,
total cash price paid for all assets acquired(cost of acquisition) (a) = $900000
Estimated market value of the buliding (b) = $508800
Total Estimated market value of all assets acquired (c)
= $508000+$297600+$28800+$124800 = $959200
% of building cost in total estimated market value of all assets (d) = (b÷c)×100
= (Estimated market value of building ÷ Total estimated market value of all assets)×100
= ($508000 ÷ $959200)×100
= 52.96%
Apportioned cost of building in cost of acquisition of assets (e)= (a×d)
= Cost of acquisition × % of building cost
= $900000 × 52.96%
= $476640
Therefore,
Apportioned cost of building is the cost for the building = $476640.
Depreciable value = cost of building - salvage value = $476640 - $27000 = $449640.
Yearly depreciation expense
= ( Depreciable value ÷ depreciable life ) = $449640 ÷ 15 yrs = $29976.
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