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On March 31, 2018, Susquehanna Insurance purchased an office building for $12,600,000. Based on their relative...

On March 31, 2018, Susquehanna Insurance purchased an office building for $12,600,000. Based on their relative fair values, one-third of the purchase price was allocated to the land and two-thirds to the building. Furniture and fixtures were purchased separately from office equipment on the same date for $1,380,000 and $880,000, respectively. The company uses the straight-line method to depreciate its buildings and the double-declining-balance method to depreciate all other depreciable assets. The estimated useful lives and residual values of these assets are as follows:

Service
Life		 Residual
Value
Building 40 10% of cost
Furniture and fixtures 20 10% of cost
Office equipment 10 $48,000

Calculate depreciation for 2018 and 2019.

Solutions

Expert Solution

For Building

Value of Land 12600000 x 1 / 3 4200000
Value of Building 12600000 x 2 / 3 8400000
12600000
Straight line Depreciation on buiding 8400000 - 840000 /40 189000
Depreciation for 2018 ,9 months 189000 x 9 /12 141750
Depreciation for 2019 8400000 - 840000 /40 189000

For Furniture & Fixture

Double declining depreciation on
Furniture and Fixture 1380000 / 20 x 2 138000
Depreciation for 2018 ,9 months 103500 x 9 /12 103500
Book value 1380000-103500 1276500
Depreciation for 2019 1276500 / 20 x 2 127650

For Office Equipment

Double declining depreciation on
Office Furniture 880000 / 10 x 2 176000
Depreciation for 2018 ,9 months 176000 x 9 /12 132000
Book value 880000-132000 748000
Depreciation for 2019 748000/10*2 149600

ekkarill92 answered 2 years ago
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