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

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2.

Depreciation Schedule as per Double Declining Depreciation

1.

Depreciation Schedule as per Straightline method Year Book Value Depreciation Accumulated Book Value Year Start Expense Depreciation Year End 1 $40,000,000 $1,975,000.00 $1,975,000 $38,025,000 2 $38,025,000 $1,975,000.00 $3,950,000 $36,050,000 3 $36,050,000 $1,975,000.00 $5,925,000 $34,075,000 4 $34,075,000 $1,975,000.00 $7,900,000 $32,100,000 5 $32,100,000 $1,975,000.00 $9,875,000 $30,125,000 6 $30,125,000 $1,975,000.00 $11,850,000 $28,150,000 7 $28,150,000 $1,975,000.00 $13,825,000 $26,175,000 8 $26,175,000 $1,975,000.00 $15,800,000 $24,200,000 9 $24,200,000 $1,975,000.00 $17,775,000 $22,225,000 10 $22,225,000 $1,975,000.00 $19,750,000 $20,250,000 11 $20,250,000 $1,975,000.00 $21,725,000 $18,275,000 12 $18,275,000 $1,975,000.00 $23,700,000 $16,300,000 13 $16,300,000 $1,975,000.00 $25,675,000 $14,325,000 14 $14,325,000 $1,975,000.00 $27,650,000 $12,350,000 15 $12,350,000 $1,975,000.00 $29,625,000 $10,375,000 16 $10,375,000 $1,975,000.00 $31,600,000 $8,400,000 17 $8,400,000 $1,975,000.00 $33,575,000 $6,425,000 18 $6,425,000 $1,975,000.00 $35,550,000 $4,450,000 19 $4,450,000 $1,975,000.00 $37,525,000 $2,475,000 20 $2,475,000 $1,975,000.00 $39,500,000 $500,000

2.

Depreciation Schedule as per Double Declining Depreciation

Year Book Value Depreciation Depreciation Accumulated Book Value Year Start Percent Expense Depreciation Year End 1 $40,000,000 10% $4,000,000 $4,000,000 $36,000,000 2 $36,000,000 10% $3,600,000 $7,600,000 $32,400,000 3 $32,400,000 10% $3,240,000 $10,840,000 $29,160,000 4 $29,160,000 10% $2,916,000 $13,756,000 $26,244,000 5 $26,244,000 10% $2,624,400 $16,380,400 $23,619,600 6 $23,619,600 10% $2,361,960 $18,742,360 $21,257,640 7 $21,257,640 10% $2,125,764 $20,868,124 $19,131,876 8 $19,131,876 10% $1,913,188 $22,781,312 $17,218,688 9 $17,218,688 10% $1,721,869 $24,503,180 $15,496,820 10 $15,496,820 10% $1,549,682 $26,052,862 $13,947,138 11 $13,947,138 10% $1,394,714 $27,447,576 $12,552,424 12 $12,552,424 10% $1,255,242 $28,702,819 $11,297,181 13 $11,297,181 10% $1,129,718 $29,832,537 $10,167,463 14 $10,167,463 10% $1,016,746 $30,849,283 $9,150,717 15 $9,150,717 10% $915,072 $31,764,355 $8,235,645 16 $8,235,645 10% $823,565 $32,587,919 $7,412,081 17 $7,412,081 10% $741,208 $33,329,127 $6,670,873 18 $6,670,873 10% $667,087 $33,996,215 $6,003,785 19 $6,003,785 10% $600,379 $34,596,593 $5,403,407 20 $5,403,407 10% $540,341 $35,136,934 $4,863,066

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