PE 10-2B Straight-line depreciation

A building acquired at the beginning of the year at a cost of $980,000 has an estimated residual value of $60,000 and an estimated useful life of 20 years. Determine (a) the depreciable cost, (b) the straight-line rate, and (c) the annual straight-line depreciation.

Answer:
a. $920,000 ($980,000 – $60,000)
b. 5% = (1/20)
c. $46,000 ($920,000 × 5%), or ($920,000/20 years)

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