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)$575,000
B)$600,000
C)$675,000
D)$700,000

Question

Quizplus · Accepted Answer

The building's depreciable amount is $900,000 (cost) - $100,000 (residual value) = $800,000. Over 40 years, the annual depreciation is $800,000 / 40 = $20,000. After 10 years, the total depreciation is $20,000 * 10 = $200,000. Therefore, the book value after 10 years is $900,000 (cost) - $200,000 (accumulated depreciation) = $700,000.

A Company Purchased a Building for $900,000 on January 1