Calculate the total cost of the plant to be recorded

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Question - Hummingbird Ltd. purchased land on which they intended to build a manufacturing plant. They incurred the following costs:

Purchase price of the property

$500,000

Legal fees for closing on the purchase

1,500

Costs to demolish the existing structure

20,000

Cost to build the plant

300,000

Cost to build a fence

7,000

Cost to pave a parking lot

10,000

Annual cost to clear the parking lot every winter

1,000

The plant is expected to have a useful life of 40 years with a residual value of $50,000. The land improvements are estimated to have a nil residual value at the end of its 20-year useful life.

Required -

(a) Calculate the total cost of the plant to be recorded.

(b) Calculate the annual depreciation expense for plant, assuming the straight-line method of depreciation is used.

(c) Calculate the accumulated depreciation for the plant after 3 years.

Reference no: EM133110927

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