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****** Scenario 1: Demolition Costs & Land Improvements A...

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Accounting

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Scenario 1: Demolition Costs & Land Improvements
A company demolishes an old building on a property purchased for $600,000(land: $400,000, building: $200,000).
Demolition costs: $35,000
New landscaping and fencing are added to the property for $20,000.
A new building will be constructed on the property in the future.
Analyze:
How are the demolition costs of the old building treated for tax purposes?
Are the landscaping and fencing costs depreciable? If so, over what timeframe?
How does the allocation of the purchase price between land and building impact future cost recovery?
Scenario 2: Switching Depreciation Methods
Equipment purchased for $100,000 with an estimated 10-year useful life.
Initial depreciation method: 200% Declining Balance
After 4 years, the company wants to switch to Straight-Line depreciation for the remainder of the asset's life.
Calculate:
Accumulated depreciation at the time of the switch.
Depreciation deduction with the straight-line method going forward.
Requirements/justifications for switching depreciation methods?

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