Question

Question 3 Concord Corp. acquired a property on September 15, 2020, for $240,000, paying $3,100 in transfer taxes and a $2,300 real estate fee. Based on the provincial assessment Information, 85% of the property's value was related to the building and 15% to the land. It is estimated that the building with proper maintenance, will last for 35 years, at which time it will be torn down and have zero salvage value. Concord, however, expects to use it for 10 years only, as it is not expected to suit the company's purposes after that. The company should be able to sell the property for $177,000 at that time, with $46,000 of this amount being for the land. Concord prepares financial statements in accordance with IFRS. Depreciation expense should be calculated to the nearest half month Your answer is incorrect. Try again. Assuming a December 31 year end, identify the building's cost. Cost of the building LINK TO TEXT LINK TO TEXT Your answer is incorrect. Try again Assuming a December 31 year end, identify the building's depreciable amount Depreciable amount 204000 LINK TO TEXT LINK TO TEXT Your answer is incorrect. Try again. Assuming a December 31 year end, Identify the building's useful life. Building's useful life

Answer 1

1. Cost of Building is $208,590

Calculation:

Purchase price	$240,000
Transfer taxes	$3,100
Real estate fee	$2,300
Total cost of Property	$245,400
x % Building	85%
= Cost of building	$208,590

2. Depreciable amount $77,590

Calculations:

Value of the property at the end of 10th Year	$177,000
(-) Value of the Land at the end of the 10th Year	($46,000)
Residual value of the Building	$131,000

Cost of building	$208,590
- Residual value	($131,000)
Depreciable amount	$77,590

3. Building's useful life is 10 Years

Because Company expects to use it for 10 years only.

4. Depreciation expense for 2020 under Straight-line is $3,880

Calculation:

Depreciation expense for 2020= [Depreciable value ÷ Useful life] x 6/12

=[$77,590/10] x 1/2

= $3,880

5. Depreciation expense for 2021 under double-decline is $37,546

Depreciation rate under straight line is 10%. Hence Rate under double decline is 20%

Year	Beginning Book value (i)	Rate (ii)	Depreciation Expense (iii)=(i)x(iii)	Ending Book value (i)-(iii)
2020	$208,590	10%*	$20,859	$187,731
2021	$187,731	20%	$37,546	$150,185

*10% taken for 2020 as it is for the half year.

6. Under ASPE, Depreciation expense for 2020 under Straight-line is $2,980

Under ASPE, Depreciation is based on Greater of

• Cost - Residual value over it's estimated useful life
• Cost - Salvage value over it's Asset's life

• Depreciable amount over it's useful life = $208,590-$131,000 = $77,590
• Depreciable amount over it's Asset life = $208,590-0

Depreciable amount over it's asset life is greater. Hence depreciation expense to be charged on $208,590.

Depreciation expense = ($208,590/35 years) x 6/12

=$5,960 x 1/2

=$2,980