Calculating Depreciation The Miller Company purchased a new headquarters buildin

Question

Calculating Depreciation The Miller Company purchased a new headquarters building on January 1 at a cost of $40 million. The building is expected to last 20 years, at which time its residual value is expected to be $5 million. Cost of Building $                              40,000,000 Salvage Value $                                 5,000,000 20 year depreciation schedule Straight-line depreciation Depreciation Expense Accumulated Depreciation Net Book Value (Cost of Asset less Accum. Dep) Year 1 Year 2 Year 3 Double Declining depreciation [2/20 = 10%] Depreciation Expense Accumulated Depreciation Net Book Value (Cost of Asset less Accum. Dep) Year 1 Year 2 Year 3 Calculating Depreciation The Miller Company purchased a new headquarters building on January 1 at a cost of $40 million. The building is expected to last 20 years, at which time its residual value is expected to be $5 million. Cost of Building $                              40,000,000 Salvage Value $                                 5,000,000 20 year depreciation schedule Straight-line depreciation Depreciation Expense Accumulated Depreciation Net Book Value (Cost of Asset less Accum. Dep) Year 1 Year 2 Year 3 Double Declining depreciation [2/20 = 10%] Depreciation Expense Accumulated Depreciation Net Book Value (Cost of Asset less Accum. Dep) Year 1 Year 2 Year 3

Explanation / Answer

Cost of the asset 40000000 Year Deprecaton expense Accumulated Deprecation Net Book Value 1 1750000 1750000 38250000 2 1750000 3500000 36500000 3 1750000 5250000 34750000 4 1750000 7000000 33000000 5 1750000 8750000 31250000 6 1750000 10500000 29500000 7 1750000 12250000 27750000 8 1750000 14000000 26000000 9 1750000 15750000 24250000 10 1750000 17500000 22500000 11 1750000 19250000 20750000 12 1750000 21000000 19000000 13 1750000 22750000 17250000 14 1750000 24500000 15500000 15 1750000 26250000 13750000 16 1750000 28000000 12000000 17 1750000 29750000 10250000 18 1750000 31500000 8500000 19 1750000 33250000 6750000 20 1750000 35000000 5000000 Cost of the asset 40000000 Double Declning Rate 10% Year Deprecaton expense Accumulated Deprecation Net Book Value 1 4000000 4000000 36000000 2 3600000 7600000 32400000 3 3240000 10840000 29160000 4 2916000 13756000 26244000 5 2624400 16380400 23619600 6 2361960 18742360 21257640 7 2125764 20868124 19131876 8                         1,913,188                                 22,781,312           17,218,688 9                         1,721,869                                 24,503,180           15,496,820 10                         1,549,682                                 26,052,862           13,947,138 11                         1,394,714                                 27,447,576           12,552,424 12                         1,255,242                                 28,702,819           11,297,181 13                         1,129,718                                 29,832,537           10,167,463 14                         1,016,746                                 30,849,283              9,150,717 15                            915,072                                 31,764,355              8,235,645 16                            823,565                                 32,587,919              7,412,081 17                            741,208                                 33,329,127              6,670,873 18                            667,087                                 33,996,215              6,003,785 19                            600,379                                 34,596,593              5,403,407 20                            403,407                                 35,000,000              5,000,000

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