A large urban HMO purchases a vacant office building to house expanded administrative functions for $500,000. The accountant, working with their real-estate agent, has estimated the value of the land at $125,000, with the remaining cost of $375,000 valued for the building. Prior to using the building, renovations costing $100,000 are completed. The renovated building has an estimated useful life of 27.5 years, with no residual value. What is the annual charge for depreciation?
| Total Value of building and land | $ 5,00,000 | ||||||
| Less:Value of land | $ 1,25,000 | ||||||
| Value of Building | $ 3,75,000 | ||||||
| Add:Renovation costs | $ 1,00,000 | ||||||
| Total Capitlised cost of building | $ 4,75,000 | ||||||
| ÷ Life in Years | 27.5 | ||||||
| Annual Charge for depreciation | $ 17,273 | ||||||
| Thus, Annual charge for depreciation is | $ 17,273 | ||||||
Get Answers For Free
Most questions answered within 1 hours.