Question

Huffman Corporation constructed a building at a cost of $30,000,000. Weighted-average accumulated expenditures (WAAE) were $12,000,000, actual interest was $1,200,000, and avoidable interest was $1,600,000. If the salvage value is $2,400,000, and the useful life is 40 years, depreciation expense for the first full year using the straight-line method is

a. $690,000
b. $705,000.
c. $720,000.
d. $735,000.

Answer 1

$730,000

Step-by-step explanation:

Calculation to determine what depreciation expense for the first full year using the straight-line method is

Using this formula

Depreciation expense=Costs of Building+Avoidable interest-Salvage value)/Useful life

Let plug in the formula

Depreciation expense=( $30,000,000 + $ 1,600,000- $2,400,000) / 40 years

Depreciation expense=$29,200,000/40 years

Depreciation expense= $730,000

Therefore depreciation expense for the first full year using the straight-line method is $730,000