Answer:
2016 = $628,800
2017 = $903,000
Explanation:
Step 1 : Determine the Cost of the Assets
Land = 1/3 x $10,200,000 = $3,400,000
Buildings = 2/3 x $10,200,000 = $6,800,000
Furniture and fixtures = $1,300,000
Office equipment = $800,000
Step 2 : Determine the Depreciation expenses for individual assets
Land
Land is not depreciated we call it a non-depreciable asset. Hence no depreciation charge for this asset.
Buildings
Straight line method is used to depreciate Buildings. Straight line method charges a fixed amount of depreciation.
Depreciation Expense = (Cost - Residual Value) ÷ Useful life
Annual depreciation = ($6,800,000 - $340,000) ÷ 25 = $258,400
2016 :
Machine is only available for use from April to December, hence 9 months depreciation not full year depreciation.
Depreciation expense = $258,400 x 9/12 = $193,800
2017 :
A full year`s depreciation can be charged
Depreciation expense = $258,400
Furniture and fixtures
The double-declining-balance method is being used.
Deprecation expense = 2 x SLDP x BVSLDP
where,
SLDP = 100 ÷ 10 = 10%
2016 :
Annual Depreciation expense = 2 x $1,300,000 x 10% = $260,000
Allow for only 9 months depreciation, hence depreciation expense will be :
Depreciation expense = $260,000 x 9/12 = $195,000
2017 :
Provide for a full year`s depreciation.
Annual Depreciation expense = 2 x ($1,300,000 - $195,000) x 10% = $221,000
Office equipment
The double-declining-balance method is being used.
Deprecation expense = 2 x SLDP x BVSLDP
where,
SLDP = 100 ÷ 5 = 20%
2016 :
Annual Depreciation expense = 2 x $800,000 x 20% = $320,000
Allow for only 9 months depreciation, hence depreciation expense will be :
Depreciation expense = $320,000 x 9/12 = $240,000
2017 :
Provide for a full year`s depreciation.
Annual Depreciation expense = 2 x ($1,300,000 - $240,000) x 20% = $424,000
Step 3 ; Calculate Total Depreciation
2016 :
Depreciation expense = $193,800 + $195,000 + $240,000 = $628,800
2017 :
Depreciation expense = $258,400 + $221,000 + $424,000 = $903,000
