Question

Rachelle owns a warehouse that she purchased in September, 19 years ago. The purchase price was $400,000. During May of the current year (year 20), Rachelle sold the warehouse.
She will be able to deduct $_____ for depreciation on the warehouse in the current year (rounded to the nearest dollar).

Answer 1

Answer:

Explanation:

Assuming the depreciation is based on 20 years on straight line basis, the yearly depreciation will be calculated using the formula:

                                        Cost-Residual Value

Annual Depreciation =   _________________

                                         Number of useful years

                                          $400,000 - $0

Annual Depreciation    =    _____________

                                              20 years

Annual Depreciation  =     $20,000

It is assumed that the residual value is nil ($0).

Since the warehouse was sold in May, it`s only a five month depreciation that will be deducted in the current year.

So current year depreciation =                     $20,000 X 5

                                                                       __________

                                                                               12

Current year depreciation = $8,333.