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Hoarding Warehouses purchases a building for $1,195,000 on January 1, 20X1 with an assumed $100,000 salvage...

Hoarding Warehouses purchases a building for $1,195,000 on January 1, 20X1 with an assumed $100,000 salvage value and a 20-year total useful life (assume a straight-line method). On January 1, 20X6, the company changes the building estimates to a $110,000 salvage value and a 24-year total useful life. How much “depreciation” will be taken in 20X6?

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Answer #1
Annual depreciation before 2016
Annual Depreciation = (Cost Of The Asstes- Salvage Value)/ Life Of The Asset
= $1195000-100000/20 years
= $54750 per year
Accumulated depreciation as on 1- jan 2016
=$54750*15
=$821250
Book value =$1195000-821250 =373750
Revised depreciation
Annual Depreciation = (Cost Of The Asstes- Salvage Value)/ Life Of The Asset
= $373750-110000/9 years
= $29305.56 per year
Depreciation for 2016 =$29305.56
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