Mooney Ltd. completed construction of an offi ce building for £2,400,000 on December 31, 2016. The company estimated that the building would have a residual value of £0 and a useful life of 40 years. A more detailed review of the expenditures related to the building indicates that £300,000 of the total cost was used for personal property and £180,000 for land improvements. The personal property has a depreciable life of 5 years and land improvements have a depreciable life of 10 years. Instructions Compute depreciation expense for 2017 using component depreciation and the straightline method.
Mooney Ltd. completed construction of an offi ce building for £2,400,000 on December 31, 2016. The company estimated that the building would have a residual value of £0 and a useful life of 40 years. A more detailed review of the expenditures related to the building indicates that £300,000 of the total cost was used for personal property and £180,000 for land improvements. The personal property has a depreciable life of 5 years and land improvements have a depreciable life of 10 years. Instructions Compute depreciation expense for 2017 using component depreciation and the straightline method.
Chapter1: Financial Statements And Business Decisions
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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.
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Mooney Ltd. completed construction of an offi ce building for £2,400,000 on December 31, 2016. The company estimated that the building would have a residual value of £0
and a useful life of 40 years. A more detailed review of the expenditures related to the
building indicates that £300,000 of the total cost was used for personal property and
£180,000 for land improvements. The personal property has a depreciable life of 5 years
and land improvements have a depreciable life of 10 years.
Instructions
Compute depreciation expense for 2017 using component depreciation and the straightline method.
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