Question

$3 to qu ch Q13.21 What would be the most common accounting value of residential investment property that you purchased for $3 million in each of the next 50 years? (Hint: Use a straight line 40-year depreciation schedule.) 913.27 Q 13.27

Answer 1

The value will start at $3 million. As straight line depreciation is used it will mean that annual depreciation will be = $3 million/40 years = $75,000 per year.

Thus the value in 2^nd year will be = $3 million – 75,000 = $2.925 million. In 3^rd year it will be = 2.925 million – 75,000 = $2.85 million and so on.

The numbers are provided in the table below and from year 40 to year 50 the worth will be $0 on the balance sheet.

Year	Value (in $)
0	3,000,000
1	2,925,000
2	2,850,000
3	2,775,000
4	2,700,000
5	2,625,000
6	2,550,000
7	2,475,000
8	2,400,000
9	2,325,000
10	2,250,000
11	2,175,000
12	2,100,000
13	2,025,000
14	1,950,000
15	1,875,000
16	1,800,000
17	1,725,000
18	1,650,000
19	1,575,000
20	1,500,000
21	1,425,000
22	1,350,000
23	1,275,000
24	1,200,000
25	1,125,000
26	1,050,000
27	975,000
28	900,000
29	825,000
30	750,000
31	675,000
32	600,000
33	525,000
34	450,000
35	375,000
36	300,000
37	225,000
38	150,000
39	75,000
40	0
41	0
42	0
43	0
44	0
45	0
46	0
47	0
48	0
49	0
50	0