Question

Paula's Pastries expanded its facilities by building an addition to make room for a larger kitchen. The original building was constructed 12 years earlier and is being depreciated using a 39-year recovery period. The cost of the new addition will be depreciated over ___ years

Answer 1

The cost of the new addition to Paula's Pastries would be depreciated over 39 years, which is the standard recovery period for non-residential real property according to U.S. tax law.

Step-by-step explanation:

In business accounting, the cost of property improvements is depreciated over a specific number of years according to IRS guidelines. For commercial property like Paula's Pastries, the new addition to an existing building typically falls under the same 39-year recovery period for straight-line depreciation as the original structure. This is the standard recovery period for non-residential real property under current U.S. tax law. Therefore, the cost of the new addition that Paula's Pastries built would likely be depreciated over 39 years, just like the original building.