Question

A building was purchased for $60,000. The asset has an expected usefull life of eight years and depreciation expense each year is $5,000 using the straight-line method. What is the residual value of the building?

10,000$
0$
12,500$
7,500$

Answer 1

To determine the residual value of the building, you need to first calculate the total amount of depreciation expense over the asset's expected useful life. In this case, the building has an expected useful life of 8 years and the annual depreciation expense is $5,000, so the total depreciation expense is 8 years * $5,000/year = $40,000.

Then, you can subtract the total depreciation expense from the original purchase price to find the residual value. In this case, the residual value is $60,000 - $40,000 = $<<60000-40000=20000>>20,000.

So the residual value of the building is $20,000. The answer is therefore 0$.