Answer:
The third-year depreciation expense: $26,081.25
Explanation:
The company uses straight-line depreciation method, Depreciation Expense per year is calculated by following formula:
Depreciation Expense = (Cost of asset − Residual Value )/Useful Life
Depreciation Expense for year 1 = ($138,000 - $10,500)/8 = $15,937.5
Depreciation Expense for year 2 = ($138,000 - $10,500)/8 = $15,937.5
At the end of year 2,
Accumulated depreciation = $15,937.5+$15,937.5=$31,875
Book vale of the asset = $138,000 - $31,875 = $106,125
At the beginning of the third year, the remaining useful life of the asset was 4 years with a residual value of $1,800.
Third-year Depreciation Expense = ($106,125 - $1,800)/4 = $26,081.25
