Question

Joe's Quik Shop bought equipment for $25,000 on January 1, 2006. Joe estimated the useful life to be 5 years with no salvage value, and the straight-line method of depreciation will be used. On January 1, 2007, Joe decides that the business will use the equipment for a total of 6 years. What is the revised depreciation expense for 2007?
a. $4,000
b. $2,000
c. $3,333
d. $5,000

Answer 1

Answer:

The correct answer is D. $5,000

Explanation:

Please remember that 3 inputs we need to remember when it comes to depreciation expense calculation is (1) Original cost, (2) Salvage value & (3) Expected useful life.The annnual depreciation expense is caluclated as below:

Depreciation expenses = (Original cost - Salvage value)/Expected useful life                                    

Putting all the number together, we have:

Depreciation expenses = (25,000 - 0)/5 = 5,000.

So the correct answer is D. $5,000