Fairfield Properties owns real property that is MACRS depreciated with n = 39 years. They paid $3.4 million for the apartment complex and hope to sell it after 10 years of ownership for 50% more than the book value at that time. Compare the expected selling price with the amount that Fairfield paid for the property.
Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
Fairfield Properties owns real property that is MACRS
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