Question

On January 1, 2015, Jose Company purchased a building for $200,000 and a delivery truck for $20,000. The following expenditures have been incurred during 2017: The building was painted at a cost of $5,000. To prevent leaking, new windows were installed in the building at a cost of $10,000. To improve production, a new conveyor system was installed at a cost of $40,000. The delivery truck was repainted with a new company logo at a cost of $1,000. To allow better handling of large loads, a hydraulic lift system was installed on the truck at a cost of $5,000. The truck's engine was overhauled at a cost of $4,000.

2.Determine the amount of depreciation for the year 2017. The company uses the straight-line method and depreciates the building over 25 years and the truck over six years. Assume zero residual value for all assets. Round your intermediate calculations and answers to the nearest whole dollar.

Asset Building 2017 Depreciation Building:_________

Asset Truck 2017 Depreciation Truck:__________

Answer 1

Capital expenses that are required to get the asset into usable condition and all expenses that are expected to provide future benefits for the company. Per the observation of the question, we understand that Jose company has purchased a building and delivery truck. In order to calcuate the depreciation expense for the assets, we will first calculate the capitalized cost of the assets.

Building = $200,000 + $5,000 + $10,000 + $40,000 = $255,000

Delivery truck = $20,000 + $1,000 + $5,000 + $4,000 = $30,000

Depreciation expense for 2017 - Building:-

Straight line Depreciation expense = (Cost of the asset - Salvage value)/Estimated lifeof the asset

Building:-

=($255,000 - $0)/25 years

=$10,200 per year

Delivery truck:-

=($30,000 - $0)/6 years

=$5,000 per year

Depreciation expenses for 2017:-

Building = $10,200

Delivery truck :- $5,000

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