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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