On January 1, 2021, The Burgundy Winery purchased a new vineyard. The vineyard purchase consisted of a building, a bottling machine, cellar equipment, and land. The total purchase price was $5,250,000. The fair market value of each asset is as follows: the building, $1,800,000; the bottling machine, $1,200,000; the cellar equipment, $600,000; and the land, $2,400,000. e) Straight-line depreciation revised for the building Year Annual Expense Accumulated Depreciation at End of Year Annual Expense Calculation 2021 147,500.00 147,500.00 (1,575,000-100,000) / 10 2022 147,500.00 295,000.00 (1,575,000-100,000) / 10 2023 147,500.00 442,500.00 (1,575,000-100,000) / 10 2024 147,500.00 590,000.00 (1,575,000-100,000) / 10 2025 147,500.00 737,500.00 (1,575,000-100,000) / 10 2026 147,500.00 885,000.00 (1,575,000-100,000) / 10 2027 81,250.00 966,250.00 (1,575,000-40,000-885,000) / 8 2028 81,250.00 1,047,500.00 (1,575,000-40,000-885,000) / 8 2029 81,250.00 1,128,750.00 (1,575,000-40,000-885,000) / 8 2030 81,250.00 1,210,000.00 (1,575,000-40,000-885,000) / 8 2031 81,250.00 1,291,250.00 (1,575,000-40,000-885,000) / 8 2032 81,250.00 1,372,500.00 (1,575,000-40,000-885,000) / 8 2033 81,250.00 1,453,750.00 (1,575,000-40,000-885,000) / 8 2034 81,250.00 1,535,000.00 (1,575,000-40,000-885,000) / 8
On January 1, 2021, The Burgundy Winery purchased a new vineyard. The vineyard purchase consisted of a building, a bottling machine, cellar equipment, and land. The total purchase price was $5,250,000. The fair market value of each asset is as follows: the building, $1,800,000; the bottling machine, $1,200,000; the cellar equipment, $600,000; and the land, $2,400,000. e) Straight-line depreciation revised for the building Year Annual Expense Accumulated Depreciation at End of Year Annual Expense Calculation 2021 147,500.00 147,500.00 (1,575,000-100,000) / 10 2022 147,500.00 295,000.00 (1,575,000-100,000) / 10 2023 147,500.00 442,500.00 (1,575,000-100,000) / 10 2024 147,500.00 590,000.00 (1,575,000-100,000) / 10 2025 147,500.00 737,500.00 (1,575,000-100,000) / 10 2026 147,500.00 885,000.00 (1,575,000-100,000) / 10 2027 81,250.00 966,250.00 (1,575,000-40,000-885,000) / 8 2028 81,250.00 1,047,500.00 (1,575,000-40,000-885,000) / 8 2029 81,250.00 1,128,750.00 (1,575,000-40,000-885,000) / 8 2030 81,250.00 1,210,000.00 (1,575,000-40,000-885,000) / 8 2031 81,250.00 1,291,250.00 (1,575,000-40,000-885,000) / 8 2032 81,250.00 1,372,500.00 (1,575,000-40,000-885,000) / 8 2033 81,250.00 1,453,750.00 (1,575,000-40,000-885,000) / 8 2034 81,250.00 1,535,000.00 (1,575,000-40,000-885,000) / 8
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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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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| On January 1, 2021, The Burgundy Winery purchased a new vineyard. The vineyard purchase consisted of a building, a bottling machine, cellar equipment, and land. The total purchase price was $5,250,000. The fair market value of each asset is as follows: the building, $1,800,000; the bottling machine, $1,200,000; the cellar equipment, $600,000; and the land, $2,400,000. | ||||||
| e) Straight-line |
||||||
| Year | Annual Expense | Annual Expense Calculation | ||||
| 2021 | 147,500.00 | 147,500.00 | (1,575,000-100,000) / 10 | |||
| 2022 | 147,500.00 | 295,000.00 | (1,575,000-100,000) / 10 | |||
| 2023 | 147,500.00 | 442,500.00 | (1,575,000-100,000) / 10 | |||
| 2024 | 147,500.00 | 590,000.00 | (1,575,000-100,000) / 10 | |||
| 2025 | 147,500.00 | 737,500.00 | (1,575,000-100,000) / 10 | |||
| 2026 | 147,500.00 | 885,000.00 | (1,575,000-100,000) / 10 | |||
| 2027 | 81,250.00 | 966,250.00 | (1,575,000-40,000-885,000) / 8 | |||
| 2028 | 81,250.00 | 1,047,500.00 | (1,575,000-40,000-885,000) / 8 | |||
| 2029 | 81,250.00 | 1,128,750.00 | (1,575,000-40,000-885,000) / 8 | |||
| 2030 | 81,250.00 | 1,210,000.00 | (1,575,000-40,000-885,000) / 8 | |||
| 2031 | 81,250.00 | 1,291,250.00 | (1,575,000-40,000-885,000) / 8 | |||
| 2032 | 81,250.00 | 1,372,500.00 | (1,575,000-40,000-885,000) / 8 | |||
| 2033 | 81,250.00 | 1,453,750.00 | (1,575,000-40,000-885,000) / 8 | |||
| 2034 | 81,250.00 | 1,535,000.00 | (1,575,000-40,000-885,000) / 8 |
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