Question

hi how do i solvle this word problem?An office building worth $1 million when completed in 2010 is being depreciated linearly over 40 years. What was the book value of the building in 2012? What will it be in 2025? (Assume the scrap value is $0.)2012 $ 2025 $

Answer 1

2012: $950,000

2025: $625,000

Step-by-step explanation:

Since the scrap value is $0, the amount depreciated each year is equal to the initial worth of the building divided by the number of years, so

`(1,000,000)/(40)=25,000`

It means that each year the worth of the building decreases by $25,000

Then, 2012 is 2 years after 2010, so the book value of the building in 2012 is:

$1,000,000 - 2($25,000) = $950,000

In the same way, 2025 is 15 years after 2010, so the book value is

$1,000,000 - 15($25,000) = $625,000

Therefore, the answers are

2012: $950,000

2025: $625,000