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boyakko [2]
3 years ago
13

Swifty Company constructed a building at a cost of $2,266,000 and occupied it beginning in January 2001. It was estimated at tha

t time that its life would be 40 years, with no salvage value.
In January 2021, a new roof was installed at a cost of $309,000, and it was estimated then that the building would have a useful life of 25 years from that date. The cost of the old roof was $164,800.
1. What amount of depreciation should have been charged annually from the years 2001 to 2020? (Assume straight-line depreciation.)
Business
1 answer:
statuscvo [17]3 years ago
7 0

Answer:

$56,650

Explanation:

Depreciation: The depreciation is an expense that shows a reduction in the value of the fixed assets due to tear and wear, obsolesce, usage, time period, etc. It is shown on the debit side of the income statement. It is a non-cash item that does not affect the cash balance.

The computation of the depreciation expense under the straight line method is shown below:

= (Original cost - residual value) ÷ (useful life)

= ($2,266,000 - $0) ÷ (40 years)

= ($2,266,000) ÷ (40 years)  

= $56,650

In this method, the depreciation is same for all the remaining useful life

All other information which is given is not relevant. Hence, ignored it

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Calculate the balance in Accumulated Depreciation at the end of the second year for all three methods
eimsori [14]

This is the full question:

At the beginning of 2016, Air Asia purchased a used airplane at a cost of $40,000,000. Air Asia expects the plane to remain useful for eight years (5,000,000 miles) and to have a residual value of $5,000,000. Air Asia expects the plane to be flow 1,200,000 the first year and 1,400,000 the second year.

1) Compute second-year (2017) depreciation expense using the following methods

a. Straight-line

b. Units-of-production

c. Double-declining-balance

2) Calculate the balance in Accumulated Depreciation at the end of the second year for all three methods:

Answer:

Explanation:

1)a) Straight-line

Depreciable base = Cost of the Asset - Residual Value

                              = $40,000,000 - $5,000,000

                              = $35,000,000

Depreciation expense per year = Depreciable base / years of useful life

                                                     = $35,000,000 / 8

                                                     = $4,375,000

The depreciation expense for the second year is = $4,375,000

                                                                                       

b) Units-of-production

Units of Production Rate = Depreciable Base / Units Over Useful Life

                                        = $35,000,000 / 5,000,000 miles

                                        = 7

Depreciation Expense = Units of Production Rate x Actual Units Produced

                                      = 7 x 1,400,000 miles in the second year

                                      = $9,800,000

c. Double-declining-balance

Double-declining balance = 2 x (Asset Cost - Residual Value ) / Useful Life of the Asset

                                           = 2 x ($40,000,000 - $5,000,000) / 8

                                           = $8,750,000

2) a) Straight-line Accumulated depreciation

We simply multiply the previous answer by two = $4,375,000 x 2

                                                                              = $8,750,000

2) b) Units-of-production Accumulated depreciation

First we find the depreciation expense for the first year using the same formula as above

= 7 x 1,200,000

= $8,400,000

Finally we simply add up depreciation expense for the two years

= $8,400,000 + $9,800,000

= $18,200,000

2) c) Double-declining-balance Accumulated depreciation

We simply multiply the first result by two = $8,750,000 x 2

                                                                    = $17,500,000

                                       

                           

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3 years ago
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