I'm having a bit of trouble with this one accounting question for depreciation on building/land.
Acquired a property of land and buildings for $1,500,000. Management estimates value of the land to be 40% of cost. Estimated useful life of 50 years.
After 25 years, property is revalued to $1,200,000, expected life remains the same and salvage value is $100,000.
What's the revaluation gain/loss and new depreciation expense one year after?
Any help or being pointed in the right direction would be great.
>>1292003
If you're good at something, never do it for free... especially on /biz/
>>1292011
That is a good point, I might have to offer $2 for the answer + explanation.
>>1292003
Don't know shit about accounting other than the 2 college classes I took 7 years ago; yet, I found several good answers online with a quick google search.
If you still need an answer tomorrow and for whatever reason can't find one online, I know a guy who used to be an account executive at Deloitte and is a legit CPA. I can show him this and I'm sure he'll know what to do.
>>1292003
1.5 m
600k land
900k building
>25yrs later
1.2 m
480k land
720k building
>26yrs later
480k land (can't depreciate)
900k - 100k SV = 800k
800k/50yrs = 16k/yr
720k building - 16k = 704k
704k + 100k sv =
=804k new revaluation building + 480k unchanged land =
$1,284,000
>>1292003
I'm gonna take a stab. It's not conventional to depreciate land (at least where I live), so how I would go about doing it is to remove land from the equation of depreciation (i.e. depreciation only applies to the buildings). Is this conventional where you are located? I need to know this.
I'm also assuming this is homework - and since the question didn't state the method of depreciation used I'm gonna assume a straight-line method. Ok?
>>1292068
I probably did this wrong. If life remains the same, then it is 720k / 25, then subtract that from 720k. Add it to the 480k land.
>>1292073
Assuming value of land is not depreciated (or more commonly, appreciated).
Cost of land: $600,000 (removed from equation)
Cost of buildings: $900,000
Value of buildings 25 years later: $600,000
Removing salvage value (to find how much you want to depreciate the asset): $600,000 - $100,000 = $500,000
Annual depreciation expense in 2nd 25-year period: $500,000 / 25 = $20,000. Does this look correct?
>>1292083
Land can never be depreciated. Just the rules kid. Basic thought it that land doesn't get destroyed over time like a house.
>>1292155
>kid
I know. If you look at my solution I never depreciated land. I was asking you why you thought it was ok to depreciate it for the first 25 years.
>>1292181
You don't and I didn't and neither did the question. The value of the land went down. Not because it was depreciated.
>>1292239
>You don't and I didn't and neither did the question.
Why the fuck did you do it then kek
You are doing into financial accounting yes? We literally just finished our depreciation unit. Do you use my accounting lab? Shitty fucking program eh?
>>1292181
Man,OP took his shit and ran
