Question

answers At the beginning of 2019, Robotics Inc. acquired a manufacturing facility for $12.3 million. $9.3 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 $1.3 million residual value. In 2021, the estimates of useful life and residual value were changed to 15 total years and $530,000, respectively.

Answer 1

Answer:

$613,077

Explanation:

Calculation for the depreciation on the building for 2021

First step is to calculate the depreciation expense for the year 2019 and 2020 using this formula

Depreciation expense = (Purchase price - Residual value) ÷ (Useful life)

Let plug in the formula

Depreciation expense= ($9,300,000 - $1,300,000) ÷ (20 years)

Depreciation expense= ($8,000,000) ÷ (20 years)

Depreciation expense= $400,000

Second step is to calculate the book value for the year 2021 using this formula

Book value = Purchase price - Depreciation expenses *2 years

Let plug in the formula

Book value= $9,300,000 - $400,000 × 2

Book value= $8,500,000

Last step is to calculate the depreciation for 2021 using this formula

2021 Depreciation=(Book value-Residual value)÷Useful life

2021 Depreciation= ($8,500,000 - $530,000) ÷ (15 years - 2 years)

2021 Depreciation=$7,970,000÷13 years

2021 Depreciation= $613,077

Therefore the depreciation on the building for 2021 will be $613,077