Question

A building purchased for $100,000 has a 20-year expected life. Assuming straight-line depreciation, how should it be shown on the balance sheet after two years?  

Answer 1

Depreciation is a non cash expense which is charged over the assets. Under straight line method, depreciation expense will be same in every year.

Depreciation = (Cost - salvage value) /useful life

Depreciation = ( 100,000-0)/20

Depreciation = $ 5,000 per annum.

Depreciation for 2 years = $ 10,000.

So the net book value of building after two years on the balance sheet will be $ 90,000.

Hence, $ 90,000 is the correct answer.

SUMMARY:

The value of building shown on balance sheet after two years will be $ 90,000.

Hence, $ 90,000 is the correct answer.