Question

Revision of Depreciation

A building with a cost of $675,000 has an estimated residual value of $270,000, has an estimated useful life of 27 years, and is depreciated by the straight-line method.

a. What is the amount of the annual depreciation?
$

b. What is the book value at the end of the fifteenth year of use?
$

c. If at the start of the sixteenth year it is estimated that the remaining life is 15 years and that the residual value is $195,000, what is the depreciation expense for each of the remaining 15 years?
$

Answer 1

a
Cost	675000
Less: Residual value	270000
Depreciable cost	405000
Divide by Useful life	27
Annual depreciation	15000
b
Cost	675000
Less: Accumulated depreciation	225000	=15000*15
Book value at the end of the fifteenth year	450000
c
Book value at the end of the fifteenth year	450000
Less: Residual value	195000
Depreciable cost	255000
Divide by Useful life	15
Depreciation expense for remaining 15 years	17000