Twin-Cities, Inc., purchased a building for $600,000. Straight-line depreciation

Question

Twin-Cities, Inc., purchased a building for $600,000. Straight-line depreciation was used for each of the first two years using the following assumptions: 25-year estimated useful life, with a residual value of $100,000.

Calculate the annual depreciation for the first two years that Twin-Cities owned the building.

Year 1 =

Year 2 =

Calculate the book value of the building at the end of the second year.

Book Value =

Twin-Cities, Inc., purchased a building for $600,000. Straight-line depreciation was used for each of the first two years using the following assumptions: 25-year estimated useful life, with a residual value of $100,000.

Explanation / Answer

In straight line depreciation the annual depreciation remains same

Depreciation per year =(Investment-salvage value)/estimated life

=(600,000-100,000)/25= $20,000

Year 1= $20,000

Year 2= $20,000

b)Book value at end of second value = Initial investment -depr for year 1-depr for year 2

=600,000-20,000-20,000=$560,000

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