Store of Values Inc. has a new building that cost $400,000. It will be depreciated using DB amortization. The estimated residual value of the building is $50,000 and it has an expected useful life of 10 years. Assuming the first year's amortization expense was recorded properly, what would be the amount of amortization expense for the second year?

Question

Quizplus · Accepted Answer

Using DB amortization, the annual depreciation expense is calculated as follows:

Year 1: (1/10) x (cost - residual value) = (1/10) x ($400,000 - $50,000) = $35,000

Year 2: (2/10) x (cost - residual value) = (2/10) x ($400,000 - $50,000) = $36,000

Therefore, the amount of amortization expense for the second year would be $36,000.