need help with homework

Question

The first year of depreciation on a residential rental building costing $200,000 purchased May 2, 2015.
A. None of the choices
B. $5,446
C. $4,546
D. $3,940
E. $2,567

 

I don't understand this problem, can you help me out with this?

Answer 1

There is not enough information to solve the problem. You need to know the estimated life of the building, the estimated residual value, and the depreciation method to be used. For straight-line depreciation, the annual expense is

 

(Cost less residual value) / number of years of life

 

For double declining balance depreciation, you use double the straight line depreciation rate and apply it to the book value of the building, disregarding residual value.

 

Without knowing the depreciation method, life, and residual value, you cannot find a solution

 

If this is a tax problem, depreciation for tax purposes is controlled by tax law, which specifies the method to be used (MACRS) and the life used for specific types of assets.