A Company Purchased a Building at a Cost of $280,000

question 212

Multiple Choice

A company purchased a building at a cost of $280,000 on January 1. The building is estimated to have a useful life of 15 years and a $40,000 salvage value. The company uses the straight-line method of depreciation. What is the amount of depreciation expense for the building for the second year?

• A)$16,000
• B)$18,667
• C)$264,000
• D)$32,000
• E)$248,000

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Definitions:

Deferred Tax Asset Valuation Allowance

A contra-asset account used to decrease the value of deferred tax assets if it is more likely than not they will not be realized.

Income Manipulation

The practice of adjusting financial statements with the intention to mislead stakeholders about the company's financial performance or health.

Deferred Tax Assets

These are financial items on a company’s balance sheet representing taxes paid or carried forward but not yet recognized in the income statement.