A building was purchased for $100 000 and used for four years of its estimated 10-year life. It has no residual value and the straight-line method is used. The carrying value of the building after the four years' usage would be reported on the balance sheet at:
A) $20 000.
B) $40 000.
C) $60 000.
D) $80 000.

Question

Quizplus · Accepted Answer

The straight-line method of depreciation assumes that the asset depreciates by an equal amount each year, so the annual depreciation expense for this building would be $10 000 ($100 000 cost / 10 years of life). After four years of use, the accumulated depreciation would be $40 000 ($10 000 x 4 years), and the carrying value (i.e. the cost of the asset minus accumulated depreciation) would be $60 000 ($100 000 - $40 000). Therefore, the correct answer is C.

A Building Was Purchased for $100 000 and Used for Four