At the beginning of 2014, Robotics Inc. acquired a manufacturing facility for $1

Question

At the beginning of 2014, Robotics Inc. acquired a manufacturing facility for $13.3 million. $10.3 million of the purchase price was allocated to the building. Depreciation for 2014 and 2015 was calculated using the straight-line method, a 25-year useful life, and a $2.3 million residual value. In 2016 the company switched to the double-declining-balance depreciation method. What is depreciation on the building for 2016? (Do not round intermediate calculations. Enter your answer in whole dollars.)

Explanation / Answer

Original cost $10.3 million; $2.3 million residual value; 25-year useful life
Annual depn. = ($10.3 million - $2.3 million)/25-years = $320,000, so
Depn. for 2014 $320,000
Depn. for 2015 $320,000
Accum.. depn. at Dec 31, 2015 $640,000, nbv at Dec 31, 2015 $9,660,000

In 2016, the company switched to the double-declining-balance depreciation method but 2 yrs have already passed, so there're 23 more yrs to go.
New annual depn. for 2016 = { ($9,660,000 - $2,300,000)/23} x 2 = $640,000

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