Leslie, Inc., followed the practice of depreciating its building on a straight-line basis. A building was purchased in 2016 and had an estimated useful life of 25 years and a residual value of $20,000. Page 428 The company's depreciation expense for 2016 was $15,000 on the building. What was the original cost of the building?

Accepted Solution

Answer:Original Cost of building=$395000Step-by-step explanation:Formula:Straight line depreciation Expense=Depreciable amount/Useful life of assetIn our Case:Depreciable amount is not givenDepreciable expense=$15000Useful life of asset =25 yearsUsing aboe formula depreciable amount can be calculated as:Depreciable amount= Depreciation Expense* Useful life of assetDepreciable amount=$15000*25Depreciable amount=$375000In order to calculate the original cost we also have to include residual cost in depreciable amount.Original Cost of building=Depreciable amount + Residual CostOriginal Cost of building=$375000+$20000Original Cost of building=$395000