A building acquired at the beginning of the year at a cost of $115,400 has an estimated residual value of $4,400 and an estimated useful life of 10 years. Determine the following:

Question

Line Item Description Amount
(a) The depreciable cost $fill in the blank 1

(b) The straight-line rate fill in the blank 2
%
(c) The annual straight-line depreciation

Answer 1

To determine the requested values, we can follow these steps:

(a) The depreciable cost:

The depreciable cost is calculated as follows:

\[ \text{Depreciable Cost} = \text{Cost of Asset} - \text{Residual Value} \]

Substituting the values provided:

\[ \text{Depreciable Cost} = $115,400 - $4,400 = $111,000 \]

Fill in the Blank 1: $111,000

(b) The straight-line rate:

The straight-line rate is calculated by dividing 100% by the estimated useful life in years.

\[ \text{Straight-Line Rate} = \frac{100%}{\text{Useful Life}} \]

Substituting the values provided:

\[ \text{Straight-Line Rate} = \frac{100%}{10} = 10% \]

Fill in the Blank 2: 10 %

(c) The annual straight-line depreciation:

The annual straight-line depreciation is calculated using the depreciable cost and the straight-line rate.

\[ \text{Annual Depreciation} = \text{Depreciable Cost} \times \text{Straight-Line Rate} \]

Substituting the values provided:

\[ \text{Annual Depreciation} = $111,000 \times 0.10 = $11,100 \]

Summary:

• (a) The depreciable cost: $111,000
• (b) The straight-line rate: 10 %
• (c) The annual straight-line depreciation: $11,100