Cost new of the improvements is $360,000 and their depreciated contribution is $270,000. What percentage have the improvements depreciated?
Correct Answer
D) 25%
Why this is correct: depreciation is measured against cost new, which is what has been lost from. Calculation: ($360,000 - $270,000) / $360,000 = 25%. Why the other choices are wrong: 33.3% divides the loss by the depreciated figure rather than by cost new, which overstates it; 75% is the percentage good, the part that remains; 20% follows from neither figure.
Why This Is the Correct Answer
Why this is correct: depreciation is measured against cost new, which is what has been lost from. Calculation: ($360,000 - $270,000) / $360,000 = 25%. Why the other choices are wrong: 33.3% divides the loss by the depreciated figure rather than by cost new, which overstates it; 75% is the percentage good, the part that remains; 20% follows from neither figure.
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