Peoples Corporation purchased a building on December 29, 2014 that cost $1,400,000 and occupied it on January 2, 2015. The owner estimated that the building would last 40 years with a salvage value of $150,000 using straight-line depreciation. In early 2018, Mr. Peoples learned that due to a permanent highway closure, the company needs to relocate at the end of 2020. He believes that the salvage value of the building at that time will be $800,000. Compute the amount of depreciation to record during 2018, and each of the two years thereafter. (Round your final answer to the nearest dollar.)

Question

Quizplus · Accepted Answer

The building's original depreciation was calculated over 40 years with a salvage value of $150,000. However, due to the change in circumstances, the useful life is now until the end of 2020, and the salvage value is $800,000. The new depreciation is calculated as: (Cost - New Salvage Value) / Remaining Useful Life = ($1,400,000 - $800,000) / 3 = $200,000 per year.

Peoples Corporation Purchased a Building on December 29, 2014 That