At the beginning of 2016, Robotics Inc. acquired a manufacturing facility for $1

Question

At the beginning of 2016, Robotics Inc. acquired a manufacturing facility for $13.7 million $10.7 million of the purchase price was allocated to the building. Depreciation for 2016 and 2017 was calculated using the straight-line method, a 20-year useful life, and a $2.7 million residual value. In 2018, the company switched to the double-declining-balance What is depreciation on the building for 2018? (Do not round intermediate calculations. Round answer to the nearest whole dollar.) Depreciation

Explanation / Answer

Original cost = 10.7 million

Residual value. = 2.7 million

Useful Life = 20 years

Depreciation under straight line method = (original cost - residual value)/ useful life

= (10.7 - 2.7 )/ 20. = 0.4 million (400000)

Depreciation for. 2016 = 400000

Depreciation for 2017 = 4000000

In 2018, depreciation method is changed to doubldeclining method,

the company simply employs the double-declining-balance method from now on. The undepreciated cost remaining at the time of the change would be depreciated DDB over the remaining useful life. A disclosure note should justify that the change is preferable and should describe the effect of the change on any financial statement line items and per share amounts affected for all periods reported.

Depreciation for 2018= 9900000 * 2/18 = 1100000

*cost of building on 2018 = 10700000 - (400000+400000) = 9900000

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