Question

At the beginning of 2016, Robotics Inc. acquired a manufacturing facility for $14.0 million. $11.0 million of the purchase price was allocated to the building. Depreciation for 2016 and 2017 was calculated using the straight-line method, a 20-year useful life, and a $3.0 million residual value. In 2018, the estimates of useful life and residual value were changed to 15 total years and $700,000, respectively.

What is depreciation on the building for 2018? (Round answer to the nearest whole dollar.)

At the beginning of 2016, Robotics Inc. acquired a manufacturing facility for $14.0 million. $11.0 million of the purchase price was allocated to the building. Depreciation for 2016 and 2017 was calculated using the straight-line method, a 20-year useful life, and a $3.0 million residual value. In 2018, the estimates of useful life and residual value were changed to 15 total years and $700,000, respectively. What is depreciation on the building for 2018? (Round answer to the nearest whole dollar.) Depreciation

Answer 1

Solution-

Depreciation for 2016 & 2017 will be = (Purchase price - residual value)/useful life

= ($11000000 - $3000000)/20 = $400000

Now value at the beginning of the year 2018 = $11000000 - $400000 - $400000 = $10200000

Now as per changed useful life and residual value the depreciation will be

Remaining useful life - 13 years

Depreciation = ($10200000 - $700000)/13

Depreciation on the building for 2018 = $730769.