Final answer:
The exact cost recovery deduction for the factory building sale cannot be determined without more information. The economic profit for the year, considering opportunity costs, would be negative $10,000.
Step-by-step explanation:
The student's question pertains to determining the cost recovery deduction (also referred to as depreciation) for the year of the sale of a factory building that was purchased in 1996 and sold in 2015. Without additional information on the nature of the depreciation method used or any changes in tax legislation over the period of ownership, the question cannot be accurately answered. However, if the Modified Accelerated Cost Recovery System (MACRS) was used, which is typical for property acquired after 1986, and assuming the building is nonresidential real property with a recovery period of 39 years, Walnut would depreciate the building at a fixed rate each year. The actual amount may not be listed among the provided choices. To address the second part of the question regarding economic profit, this is calculated by subtracting both explicit and implicit costs from total revenues. In this scenario, with revenues of $200,000, explicit costs of $85,000, and implicit costs, such as the opportunity cost of renting the land for $30,000, the economic profit would then be negative $10,000 per year.