Mendenhall Corporation constructed a building at a cost of $10,000,000. Weighted-average accumulated expenditures were $4,000,000, actual interest was $400,000, and avoidable interest was $200,000. If the salvage value is $800,000, and the useful life is 40 years, depreciation expense for the first full year using the straight-line method is

Question

Quizplus · Accepted Answer

The depreciation expense using the straight-line method is calculated as (Cost - Salvage Value) / Useful Life. Thus, ($10,000,000 - $800,000) / 40 = $230,000. However, the question asks for the first full year, which includes avoidable interest, so the cost becomes $10,200,000. Therefore, ($10,200,000 - $800,000) / 40 = $235,000.

Mendenhall Corporation Constructed a Building at a Cost of $10,000,000