[accountingmajor]

I am stuck with a question regarding the straight-line depreciation!

If a building has a cost of $200,000 and has a residual value of $10,000 and a 40-year useful life. The building was purchase in May 2006. A year prior.

Do I first use the straightline depreciation method? What do I do with the part of the question where it was purchased a year prior?? Am I supposed to minus the one year the building was used from the 40 year useful life..

CAN SOMEONE PLEASE HELP!!

THANKS!

[rwong2k]

first year depreciation would be
(200000-10000) / 40 x 7/12

Depends if it's may 1st or may 31st but the 7/12 is the remaining months in the year

If it was purchased a year prior then it's minus one year (or number of years remaining)
Here's an example of the formula off the internet

Straight Line Depreciation Method


(cost - salvage) / # of years x fraction remaining of the year if it's not purchased at jan 1st.

Alternatively, your financial calculator will be able to produce the answer for you to save some time during an exam once you've understood the technique

[accountingmajor]

Thanks So Much!!

[accountingmajor]

would the same formula above apply if instea of residual value, it would be salvage value?

thanks!

[morgaine300]

Residual and salvage are the same thing, except one's easier to say and spell. ;)

I have a question. What are you supposed to be doing? If 2006 is the "prior year," then you are apparently in 2007. Are you supposed to give 2007's depreciation? You haven't actually said what exactly you are looking for. i.e. it would be a whole lot easier to know "what to do with the part of the question" concerning the prior year, if we knew what the problem was actually asking for. (You're pretty sketchy on some of your posts. You asked a depreciation question yesterday and wer not clear about what the problem was asking you to do. We can help better if you make sure to say what you need to do/know, and not just present the information.)

The basic formula is (cost - residual)/useful life, meaning you have 4750 each year. That adjustment only needs made in 2006 and the last year. (The last year is the leftovers from what didn't depreciate the first year.) But if you're doing 2007, it's the 4750.

[morgaine300]

See here:

https://www.askmehelpdesk.com/financ...ry-223030.html

Dollar amount of the building is different, but otherwise appears to be the same problem.

[crespin79]

For which financial period are you preparing the accounts? Was the building ever depreciated?If you are preparing the accounts? Please send an e-mail to [email protected].