Question

# At the beginning of 2019, Robotics Inc. acquired a manufacturing facility for \$13.0 million. \$10.0 million...

At the beginning of 2019, Robotics Inc. acquired a manufacturing facility for \$13.0 million. \$10.0 million of the purchase price was allocated to the building. Depreciation for 2019 and 2020 was calculated using the straight-line method, a 20-year useful life, and a \$2.0 million residual value. In 2021, the estimates of useful life and residual value were changed to 15 total years and \$600,000, respectively.

What is depreciation on the building for 2021?

Depeciation = (Cost - Salvage Value)/ Useful life of Asset

Depreciation = (\$11 -\$2)/20 = \$9 Million / 20 =\$450,000

Depreciation per year = \$450,000

Depreciation for 2019 and 2020 = \$450,000*2 = \$900,000

Book Value at the end of 2020 = \$11 Million - \$900,000 = \$10,100,000

In Year 2021 Residual Value and Useful Life of Asset were changed

Residual Value = \$600,000 and Useful Life = 15 years i.e remaining useful life = 13 years

Depreciation for the year 2021 = (\$10,101,000 - \$600,000)/13

= \$9500000/13

=\$730769

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