On March 31, 2018, Susquehanna Insurance purchased an office building for $11,400,000. Based on their relative...

On March 31, 2018, Susquehanna Insurance purchased an office building for $11,400,000. 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 $1,340,000 and $840,000, 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 30 10% of cost Furniture and fixtures 10 10% of cost Office equipment 5 $44,000 Required: Calculate depreciation for 2018 and 2019. (Do not round intermediate calculations.)

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Expert Solution

On the portion of land we will not charge Depreciation.

Buliding portion=2/3*11400000=7600000

Particular	office building	furniture	office equipment
Cost(a)	7600000	1340000	840000
Life(b)	30	10	5
Rate of depreciation c=(100/b)*2	6.6666666%	20%	40%
Depreciation for *2018(ca) =d**	506666.67	268000	336000
Value at beginning of 2019(a-d)=e	7093333.33	1072000	504000
Depreciation for *2019(ec)**	472888.88	214400	201600

In the double declining method of depreciation we don't sub tract salvage value. Hence salvage or Residual value does not effect calculation.

ekkarill92 answered 2 years ago

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