A building with a cost of $780,000 has an estimated residual value of $90,000, has an estimated useful life of 40 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 twenty-fourth year of use? (c) If at the start of the twenty-fifth year it is estimated that the remaining life is 10 years and that the residual value is $70,000, what is the depreciation expense for each of the remaining 10 years?
Answer:
a. $17,250 [($780,000 – $90,000) ÷ 40]
b. $366,000 [$780,000 – ($17,250 × 24 yrs.)]
c. $29,600 [($366,000 – $70,000) ÷ 10 yrs.]