An asset has an original basis of $25,000 and depreciation has been claimed for the asset in the amount of $20,000.If the asset's adjusted basis is $15,000, what is the amount of capital improvements that have been made to the asset?
A)$5,000
B)$10,000
C)$20,000
D)$30,000
E)None of the above

Question

Quizplus · Accepted Answer

The adjusted basis of the asset is calculated by subtracting the total depreciation claimed from the original basis. In this case, the adjusted basis is $15,000 which means depreciation of $20,000 has been claimed. Therefore, the total amount spent on the asset including the original basis must be $35,000 ($25,000 + $20,000). To find the amount of capital improvements made to the asset, we subtract the original basis from the total amount spent, which gives us $10,000 ($35,000 - $25,000). Therefore, (B) is the correct answer.

An Asset Has an Original Basis of $25,000 and Depreciation