Question

# a building acquired at the beginning of the year at a cost of 67600 has an...

a building acquired at the beginning of the year at a cost of 67600 has an estimated residual value of \$2600 and an estimated useful life of ten years. determine the following: a) depreciation cost b) the straight line rate c) the annual straight line depreciation

(a) Depreciation cost = Cost - Residual value

Depreciation cost = \$67600 - \$2600 = \$65000.

(b) Under the straight line method, depreciation is calculated by the following formula:

Annual Depreciation = Depreciation cost / Useful life

Depreciation cost = \$65000, useful life = 10

Annual Depreciation = / 10 = \$6500

Now, Straight line rate is given by:

Straight line rate = Annual Depreciation / Depreciation cost * 100

Straight line rate = \$6500 / \$65000 * 100

Straight line rate = 10%

(c) Annual straight line depreciation = \$6500 (as calculated in point (b) above)

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