A. Mava Corp. purchased a ware
A. Mava Corp. purchased a warehouse for $3,040,000 on October 1,2017. The warehouse hasbeen depreciated using the sum-of-the-years’-digits method with theestimated usagesummarized below:
Useful life 20 yearsResidual value $ 205,000
Required:A1. Calculate the depreciation expense for the first full year ofthe warehouse’s useful lifefrom October 1, 2017, to September 30, 2018.A2. Calculate the depreciation expense for the second full year ofthe warehouse’s usefullife from October 1, 2018, to September 30, 2019.A3. Calculate the depreciation expense for the year ended December31, 2018.
Answer:
- Working
|
A |
Cost |
$ 3,040,000.00 |
|
B |
Residual Value |
$ 205,000.00 |
|
C=A – B |
Depreciable base |
$ 2,835,000.00 |
|
1+2+3+4+5+6+7+8+9+10+11+12+13+14+15+16+17+18+19+20 |
Sum of digits |
210 |
|
Year |
Depreciable base |
Formula |
Depreciation expense |
Accumulated Depreciation |
Ending Book Value |
|
1st |
$ 2,835,000.00 |
[2835000 x 20/210] |
$ 270,000.00 |
$ 270,000.00 |
$ 2,770,000.00 |
|
2nd |
$ 2,835,000.00 |
[2835000 x 19/210] |
$ 256,500.00 |
$ 526,500.00 |
$ 2,513,500.00 |
- Requirement A1Depreciation Expense = $ 270,000 [calculated above]
- Requirement A2Depreciation Expense = $ 256500 [calculated above]
- Requirement A3Depreciation expense for year ended 31 Dec 2018= (9 months depreciation of 1st year) + (3 monthsdepreciation of 2nd year)= ($270000 x 9/12) + ($256500 x 3/12)= 202500 + 64125= $ 266,625 Answer
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