Question

An investment property now worth $180,000 was purchased seven years ago for $142,000. At the time of the purchase, the land was valued at $18,000. Using a 39-year life for straight-line depreciation purposes, the present book value of the property isa. $95,071.35.b. $113,071.00.c. $126,000.50.d. $119,743.59.

Answer 1

Answer:

d. $119,743.59

Step-by-step explanation:

actual value (AV)=$180,000

purchase price (PP) =$142,000

intial value (IV) =$18,000

useful live (UL)= 39 years

First, we subtract the value of the property from the purchase value or IV to know the value to be depreciated:

PP-IV= $142,000-$18,000 = $124,000

Then we find out the yearly depreciation by dividing $124,000 into useful live (UL) years:

$124,000/39 = $3,179.49 This is the amount that the property depreciates every year.

But after 7 years the depreciation is: $3,179.49*7= $22,256.41  

We subtract the depreciation in the 7 years from the purchase price (PP) and that's the present book value of the property:  

$142,000-$22,256.41=$119,743.6