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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
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Answer #1

(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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