Magpie Plc purchased a building on a prime central business district site for €800,000.The value of the land is considered to be €350 000.The useful life of the building is expected to be 25 years after Magpie Ltd spends a further €80 000 on improvements.The residual value of the building at that time is estimated to be €60 000.The benefits from owning the land and building are expected to be derived evenly.What is the appropriate annual depreciation charge?

Question

Quizplus · Accepted Answer

Depreciation = (800,000-60,000)/25 = 30,000Land is not depreciated, so depreciation charge = 30,000/2 = 15,000Add back improvements = 15,000 + 80,000 = 95,000Depreciation = 95,000/25 = 3,800Annual depreciation charge = 3,800 x 5 = 19,000

Magpie Plc Purchased a Building on a Prime Central Business