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Cost ApproachEASY13.6% of exam

Cost new is $300,000, accrued depreciation is $75,000, and the effective age is 15 years. What average annual depreciation does this indicate?

Correct Answer

C) $5,000 per year

Why this is correct: Calculation: $75,000 / 15 = $5,000 per year. Why the other choices are wrong: $20,000 divides cost new by the effective age, which is not depreciation at all; $1,667 divides the depreciation by 45 years; $4,500 follows from neither figure.

Answer Options
A
$4,500 per year
B
$20,000 per year
C
$5,000 per year
D
$1,667 per year

Why This Is the Correct Answer

Why this is correct: Calculation: $75,000 / 15 = $5,000 per year. Why the other choices are wrong: $20,000 divides cost new by the effective age, which is not depreciation at all; $1,667 divides the depreciation by 45 years; $4,500 follows from neither figure.

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