Leslie, Inc., followed the practice of depreciating its building on a straight-line basis. A building was purchased
Question:
Leslie, Inc., followed the practice of depreciating its building on a straight-line basis. A building was purchased in 2019 and had an estimated useful life of 25 years and a residual value of $20,000. The company’s depreciation expense for 2019 was $15,000 on the building. What was the original cost of the building?
a. $395,000
b. $500,000
c. $520,000
d. Cannot be determined from the information given.
Step by Step Answer:
Financial Accounting
ISBN: 978-1259964947
10th edition
Authors: Robert Libby, Patricia Libby, Frank Hodge
Related Video
In accounting terms, depreciation is defined as the reduction of the recorded cost of a fixed asset in a systematic manner until the value of the asset becomes zero or negligible. An example of fixed assets are buildings, furniture, office equipment, machinery, etc. The land is the only exception that cannot be depreciated as the value of land appreciates with time. Depreciation allows a portion of the cost of a fixed asset to be the revenue generated by the fixed asset. This is mandatory under the matching principle as revenues are recorded with their associated expenses in the accounting period when the asset is in use. This helps in getting a complete picture of the revenue
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