A building with a cost of $1,200,000 has an estimated residual value of $250,000, has an estimated useful life of 40 years

A building with a cost of $1,200,000 has an estimated residual value of $250,000, 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-eighth year of use? (c) If at the start of the twenty-ninth year it is estimated that the remaining life is 10 years and that the residual value is $180,000, what is the depreciation expense for each of the remaining 10 years?

Answer:

a. $23,750  [($1,200,000 – $250,000) ÷ 40] or [($1,200,000 – $250,000) × 2.5%]

b. $535,000  [$1,200,000 – ($23,750 × 28 yrs.)]

c. $35,500  [($535,000 – $180,000) ÷ 10 yrs.]