A contractor is planning to purchase a building for $350,000 to use as their business headquarters. The building will be depreciated over 39 years using straight-line depreciation with no salvage value. What is the monthly depreciation expense?
Correct Answer
C) $750
Annual depreciation = $350,000 / 39 years = $8,974.36. Monthly depreciation = $8,974.36 / 12 months = $747.86, which rounds to approximately $750. Commercial buildings are typically depreciated over 39 years for tax purposes.
Why This Is the Correct Answer
Option C ($750) is correct because it follows the proper straight-line depreciation calculation for commercial buildings. The annual depreciation is $350,000 ÷ 39 years = $8,974.36, and the monthly amount is $8,974.36 ÷ 12 = $747.86. This rounds to approximately $750, which matches option C. The 39-year depreciation period is the standard IRS requirement for non-residential commercial property.
Why the Other Options Are Wrong
Option B: $8,974
Option A ($747) represents the exact calculated amount ($747.86) but fails to account for proper rounding to the nearest practical dollar amount typically used in business accounting.
Option D: $897
Option B ($8,974) gives the annual depreciation amount rather than the monthly amount requested in the question, showing a failure to complete the final division by 12 months.
Memory Technique
Remember '39 Commercial' - Commercial buildings get 39 years. Think 'C for Commercial, C for 39 in Roman numerals (XXXIX)' to remember the depreciation period.
Reference Hint
IRS Publication 946 (How to Depreciate Property) or accounting/tax sections of contractor reference materials covering MACRS depreciation schedules
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