The General Service Contractor Company paid $510,000 for a house and lot. The value of the...
The General Service Contractor Company paid $510,000 for a house and lot. The value of the land was appraised at $125,000 and the value of the house at $385,000. The house was then torn down at an additional cost of $10,000 so that a warehouse could be built on the combined lots at a cost of $1,200,000. What is the value of the property with the warehouse? For depreciation purposes, what is the cost basis for the warehouse? The value of the property with the warehouse is __
Homework Answers
Solution:-
The Loss in the value of asset because of use in the
Poduction Process is called Depreciation.
There are 2 different ways of calculation of Depriciation.
1- Book depreciation method
2- Tax depriciation method
---------------------------------------------------------------------------------------------------------------------------------------------------
It is siven that general service contractor Company has paid $510,000.The value of land is $125,000 and the value of house is $3,85,000.
It is required to calculate the value of the property with the
warehouse.
The value of building is calculated as shown below:
value of building=Original Cost+New Building+Demolition
expenses
=385000+1200000+10000
=15,95,000
Value of Building is=$15,95,000
-------------------------------------------------------------------------------------------------------------------------------------------------------
The value of land is given as $125,000
The property value is calculated as shown below:
Total Property value=$1,55,000+$1,200,000
=$13,55,000
The total property value is=$13,55,000
--------------------------------------------------------------------------------------------------------------------------------------------------------
The Cost basis for the warehouse is calculated as shown
below:
Cost basis for depreciation=$10,000+$1,200,000
=$12,10,000
The cost basis for depreciation is=$12,10,000
-------------------------------------------------------------------------------------------------------------------------------------------------------
Hence,
Value of Building is=$15,95,000
The total property value is=$13,55,000
The cost basis for depreciation is=$12,10,000
Add Answer to:
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Bart's Company has prepared the PP&E and depreciation
schedule shown in Exhibit 8.54.1 below.
The following information is available (assume the beginning
balance has been audited):
The land was purchased eight years ago when building 1 was
erected. The location was then remote but now is bordered by a
major freeway. The appraised value of the land is $35 million.
Building 1 has an estimated useful life of 35 years and no
residual value.
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