At the beginning of 2022, Robotics Inc. acquired a manufacturing facility for $12 million. $9 million of
Question:
At the beginning of 2022, Robotics Inc. acquired a manufacturing facility for $12 million. $9 million of the purchase price was allocated to the building. Depreciation for 2022 and 2023 was calculated using the straight-line method, a 25-year useful life, and a $1 million residual value. In 2024, the estimates of useful life and residual
value were changed to 20 total years and $500,000, respectively. What is depreciation on the building for 2024?
Step by Step Answer:
Calculation of annual depreciation after the estimate change 9000000 Cost 320000 Prev...View the full answer
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In accounting terms, depreciation is defined as the reduction of the recorded cost of a fixed asset in a systematic manner until the value of the asset becomes zero or negligible. An example of fixed assets are buildings, furniture, office equipment, machinery, etc. The land is the only exception that cannot be depreciated as the value of land appreciates with time. Depreciation allows a portion of the cost of a fixed asset to be the revenue generated by the fixed asset. This is mandatory under the matching principle as revenues are recorded with their associated expenses in the accounting period when the asset is in use. This helps in getting a complete picture of the revenue
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