At the beginning of 2016, Robotics Inc. acquired a manufacturing facility for $12 million. $9 million of the purchase price was allocated to the building. Depreciation for 2016 and 2017 was calculated using the straight-linemethod, a 25-year useful life, and a $1 million residual value. In 2018, the estimates of useful life and residualvalue were changed to 20 years and $500,000, respectively. What is depreciation on the building for 2018?
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
At the beginning of 2016, Robotics Inc. acquired a manufacturing facility for $12 million. $9 million of the purchase price was allocated to the building.
method, a 25-year useful life, and a $1 million residual value. In 2018, the estimates of useful life and residual
value were changed to 20 years and $500,000, respectively. What is depreciation on the building for 2018?
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