Barber, Inc., depreciates its building on a straight-linebasis. A building was purchased on January 1 that had anestimated useful life of 20 years and a residual value of$20,000. The company’s Depreciation Expense for thatyear was $20,000 on the building. What was the originalcost of the building?a. $360,000 c. $400,000b. $380,000 d. $420,000
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Barber, Inc., depreciates its building on a straight-line
basis. A building was purchased on January 1 that had an
estimated useful life of 20 years and a residual value of
$20,000. The company’s
year was $20,000 on the building. What was the original
cost of the building?
a. $360,000 c. $400,000
b. $380,000 d. $420,000
Trending now
This is a popular solution!
Step by step
Solved in 2 steps