Question

Peavey Enterprises purchased a depreciable asset for $24,500 on April 1, Year 1. The asset will be depreciated using the straight-line method over its four-year useful life. Assuming the asset's salvage value is $2,500, what will be the amount of accumulated depreciation on this asset on December 31, Year 3? a. $15,125.b. $4,583.c. $22,000.d. $18,333.e. $5,500.

Answer 1

Answer:

a. $15,125

Explanation:

The computation of the accumulated depreciation is shown below:

The formula i.e. be used for the yearly depreciation expense using the straight-line method is shown below:

= (Original cost - residual value) ÷ (useful life)  

For the first year

= ($24,500 - $2,500) ÷ (4 years)  

= ($22,000) ÷ (4 years)  

= $5,500

The 9 months depreciation is $4,125

For the second year

= ($24,500 - $2,500) ÷ (4 years)  

= ($22,000) ÷ (4 years)  

= $5,500

For the third year

= ($24,500 - $2,500) ÷ (4 years)  

= ($22,000) ÷ (4 years)  

= $5,500

Now the accumulated depreciation is

= $4,125 + $5,500 + $5,500

= $15,125