Question

Six years ago a commercial property owner paid $490,000 for her complex which included 10 acres of land valued at $100,000. Using a 40-year straight-line depreciation method, what would be the current value of the apartment complex?

Answer 1

Answer:

AS land cannot be depreciated we will first subtract the value of the land from the complex so we are left with $390,000 (490,000-100,000)

In straight line method each year the asset is depreciated by the same amount so in order to find out yearly depreciation we will divide 390,000 by 40

=9750

In 6 years the complex has depreciated for $58,500

So the current value of the apartment complex would be (490,000-58500)

The current value of the apartment complex is $431500

Explanation: