Question

Income-producing buildings built after 19 September 1987 are depreciated at 2.5% pa. A small commercial building is built after this date at a cost of $18.5 million. Use correct depreciation formulas and show full working out for your answers.

(a) Find it written down value after 8 years.

(b) Find its written down value after 9 years

(c) What was its depreciation in the ninth year.

(d) Calculate its depreciation in the 15 th year.

Answer 1

	Asset value		18,500,000.00
	Depreciation rate		2.50%
	The question does not mention the type of depreciation
	It is assumed to ne SLM
	Depreciation for each year		462,500.00
1	WDV for 8th year
	Depreciation for 8 years (462500*8)		3,700,000.00
	WDV = Book value less depreciation		14,800,000.00
2	WDV for 9th year
	Depreciation for 1 year		462,500.00
	WDV for 9th year = 8th year WDV less 1 year depreciation		14,337,500.00
3	Depreciation at 9 th year		462,500.00
	(Since SLM Same depreciation)
4	Depreciation at 15th year		462,500.00
	(Since SLM Same depreciation)

Assume depreciation to be reducing balance
See below calculations
		2.50%
	a	b	c
		(a x 2.5%)	(a-b)
Year	Book value	Depreciation	WDV
0	18,500,000.00	462,500.00	18,037,500.00
1	18,037,500.00	450,937.50	17,586,562.50
2	17,586,562.50	439,664.06	17,146,898.44
3	17,146,898.44	428,672.46	16,718,225.98
4	16,718,225.98	417,955.65	16,300,270.33
5	16,300,270.33	407,506.76	15,892,763.57
6	15,892,763.57	397,319.09	15,495,444.48
7	15,495,444.48	387,386.11	15,108,058.37
8	15,108,058.37	377,701.46	14,730,356.91
9	14,730,356.91	368,258.92	14,362,097.99
10	14,362,097.99	359,052.45	14,003,045.54
11	14,003,045.54	350,076.14	13,652,969.40
12	13,652,969.40	341,324.23	13,311,645.16
13	13,311,645.16	332,791.13	12,978,854.03
14	12,978,854.03	324,471.35	12,654,382.68
15	12,654,382.68	316,359.57	12,338,023.12

1          WDV 8 th year           14,730,356.91

2          WDV 9 th year            14,362,097.99

3          Depreciation                     368,258.92

4          Depreciation                      316,359.57