Question: A building acquired at the beginning of the year at a cost of $145,600 has an estimated residual value of $5,600 and an estimated useful life of 10 years. Determine the following:
(a) The depreciable cost
(b) The straight-line rate
(c) The annual straight-line depreciation
Answer:
(a) The depreciable cost is 140,000
(b) The straight-line rate is 9.62%
(c) The annual straight-line depreciation is $14000
Explanation:
(a) The depreciable cost = cost less residual value(145600 - 5600) = 140000
(b) The straight-line rate = annual depreciation / cost * 100
14000/145600 *100 = 9.62%
(c) The annual straight-line depreciation = depreciable cost / no. of years
140000/10 = 14000
