Question

An office building worth $1 million when completed in 2010 is being depreciated linearly over 50 years. What was the book value of the building in 2014? What will it be in 2022? (Assume the scrap value is $0.)

Answer 1

To calculate the book value of the building, we need to calculate the annual depreciation amount and multiply it by the number of years elapsed since the building was completed.

The annual depreciation amount is calculated as: $1 million / 50 years = $20,000

In 2014, the book value of the building was: $1 million - ($20,000 * (2014 - 2010)) = $1 million - ($20,000 * 4) = $960,000

In 2022, the book value of the building will be: $1 million - ($20,000 * (2022 - 2010)) = $1 million - ($20,000 * 12) = $680,000