Question

If the reproduction cost of a house is $300,000 with an economic life of 50 years, how much does the house depreciate each year using the straight line method of calculating depreciation?

Answer 1

Using the straight-line method, a house with reproduction cost of $300,000 and an economic life of 50 years depreciates at $6,000 per year.

Step-by-step explanation:

To calculate the yearly depreciation of the house using the straight-line method of depreciation, you divide the reproduction cost of the house by its economic life. In this case, the house has a reproduction cost of $300,000 and an economic life of 50 years.

The yearly depreciation expense is calculated as:

Yearly Depreciation Expense = Total reproduction cost / Economic life

Yearly Depreciation Expense = $300,000 / 50 years

Yearly Depreciation Expense = $6,000 per year

Therefore, the house depreciates by $6,000 each year using the straight-line method.