A building was purchased on August 1 for $450,000.It has a salvage value of $38,000 and a useful life of 35 years.To the nearest dollar,how much will the depreciation expense for the building be for the first year ended December 31,using the straight-line method?
A)$12,857
B)$5,357
C)$4,905
D)$11,771

Question

Quizplus · Accepted Answer

To calculate annual depreciation using the straight-line method, we need to use this formula:

Depreciation Expense = (Cost of the asset - Salvage Value) / Useful life

In this case, the cost of the building is $450,000, the salvage value is $38,000, and the useful life is 35 years.

Depreciation Expense = ($450,000 - $38,000) / 35 = $12,857.14 per year

However, we need to calculate the depreciation expense only for the first year ended December 31, which is 5 months after August 1.

Therefore, we need to use only 5/12 of the annual depreciation expense:

Depreciation Expense for the first year = ($12,857.14 x 5) / 12 = $5,356.96

Rounding this to the nearest dollar gives us a depreciation expense of $4,905.

Therefore, the correct answer is choice C.

A Building Was Purchased on August 1 for $450,000