Computing Depreciation and Accounting for a Change of Estimate

In January 2016, Rankine Company paid $10,625,000 for land and a building. An appraisal estimated that the land had a fair value of $3,125,000 and the building was worth $7,500,000. Rankine estimated that the useful life of the building was 30 years, with no residual value.

a. Calculate annual depreciation expense using the straight-line method.

$Answer

b. Calculate depreciation for 2016 and 2017 using the double-declining-balance method. Round answers to the nearest whole number.

2016 $Answer

2017 $Answer

c. Assume that in 2018, Rankine changed its estimate of the useful life of the building to 25 years. If the company is using the double-declining-balance method of depreciation, what amount of depreciation expense would Rankine record in 2018 ?

Do not round until your final answer. Round answer to the nearest whole number.