A specified straight-line schedule accrued exactly $400,000 of equal annual depreciation over 8 years. What annual scheduled amount is that? This does not independently measure current market depreciation.
Correct Answer
C) $50,000
400000÷8 = 50000. Common errors: reporting the total accrued depreciation instead of the annual amount gives $400,000; counting 9 years (both end points) instead of 8 gives $44,444; dividing by 12 months instead of 8 years gives $33,333.
Why This Is the Correct Answer
Option C is correct because straight-line depreciation spreads the total equally over the period: $400,000 ÷ 8 years = $50,000 per year.
Why the Other Options Are Wrong
Option A: $33,333
Option A, $33,333, divides by 12 ($400,000 ÷ 12) as if the period were months. The schedule runs 8 years, so the annual amount is $400,000 ÷ 8 = $50,000.
Option B: $44,444
Option B, $44,444, divides by 9 years ($400,000 ÷ 9), as if both end points were counted. The schedule covers 8 years, giving $400,000 ÷ 8 = $50,000.
Option D: $400,000
Option D, $400,000, is the total accrued depreciation over all 8 years, not the annual amount. Dividing by 8 gives $50,000 per year.
Total divided by years
Straight-line means equal slices: divide the total by the number of years in the schedule.
How to use: Use this to compute any equal annual amount from a total and a stated period.
Exam Tip
Check the unit of time in the question before dividing. Also keep accounting depreciation separate from appraisal depreciation when a question asks about market value.
Common Mistakes to Avoid
- -Dividing by 12 months instead of the number of years
- -Reporting the total instead of the annual amount
- -Treating book depreciation as market depreciation
Concept Deep Dive
Analysis
This question tests simple straight-line arithmetic. Equal annual amounts that total $400,000 over 8 years are found by dividing the total by the number of years. The stem also reminds you that a scheduled accounting charge is not a measure of market depreciation.
Background Knowledge
For accounting purposes, depreciation is set when the asset is new, based on a preselected life that determines the periodic charge. Appraisal depreciation instead measures the actual loss in value from all causes as of the valuation date. A scheduled amount is therefore an arithmetic result, not market evidence of depreciation.
Real-World Application
An owner shows an appraiser a tax schedule that has written off $400,000 of a building over 8 years. The appraiser notes the $50,000 annual charge but measures actual depreciation from market evidence instead.
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