Question

A building that was purchased on December 31, 2003, for $2,725,000 was originally estimated to have...

A building that was purchased on December 31, 2003, for $2,725,000 was originally estimated to have a life of 50 years with no salvage value at the end of that time. Depreciation has been recorded through 2017. During 2018, an examination of the building by an engineering firm discloses that its estimated useful life is 15 years after 2017. What should be the amount of depreciation for 2018?

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Answer #1
Annual Depreciation with useful life 50 years
Annual Depreciation = (Cost Of The Asstes- Salvage Value)/ Life Of The Asset
= $2725000-0/50 years
= $54500 per year
Accumulated depreciation at the end of year 2017 =$54500*14=$763000
Book Value = $2725000-763000
=$1962000
Annual Depreciaiton with revised 15 years life
Annual Depreciation = (Cost Of The Asstes- Salvage Value)/ Life Of The Asset
= $1962000-0/15 years
= $130800 per year
Depreciation for 2018 =$130800
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