Question

A company purchased a building for $900,000 on January 1. The building is being depreciated over...

A company purchased a building for $900,000 on January 1. The building is being depreciated over 40 years with an estimated residual value of $100,000. What will be the book value of the building in 10 years (assuming a December 31 year end)?

a.$675,000

b.$575,000

c.$700,000

d.$600,000

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Homework Answers

Answer #1

Correct Answer: Option: C: $ 700,000

Working:

Straight line Method

A

Cost

$      900,000.00

B

Residual Value

$      100,000.00

C=A - B

Depreciable base

$      800,000.00

D

Life [in years left ]

         40

E=C/D

Annual SLM depreciation

$ 20,000.00

Depreciation Expense per year

$ 20,000.00

Depreciation Expense for 10 years

$200,000.00

Cost of building

$ 900,000.00

Les: depreciation expense for 10 years

$ 200,000.00

Book value after 10 years

$ 700,000.00

End of Answer.

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