Question

A property is purchased for $480,000. The land is valued at 10% of the initial purchase price of the property. Given a 39 year depreciation term, what is the annual depreciation expense?

Answer 1

$11,076.92

Step-by-step explanation:

Data provided in the question:

Purchasing cost of the property = $480,000

Value of land = 10% of the initial purchase price of the property

Depreciation term = 39 years

Now,

Annual depreciation

= [ Beginning depreciable basis ] ÷ [ Depreciation term ]

also,

Beginning depreciable basis = Purchasing cost of the property - Value of land

= $480,000 - $48,000

= $432,000

Therefore,

Annual depreciation = $432,000 ÷ 39 years

= $11,076.92