On 1 January,Broncos Ltd paid $20 million for a track of land with a building.The building was in a bad condition and had to be refurbished for another $2,000,000.The adjacent vacant land is valued at $15,000,000.It is expected that the building will be in use for at 20 years.What is the depreciation expense for the first year?

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The depreciable cost of the building is $2,000,000 ($20,000,000 purchase price - $15,000,000 value of adjacent vacant land - $2,000,000 cost of refurbishment). Assuming straight-line depreciation over 20 years, the annual depreciation expense is $100,000 ($2,000,000 depreciable cost / 20 years).

On 1 January,Broncos Ltd Paid $20 Million for a Track