Question

When originally purchased, a vehicle costing $26,100 had an estimated useful life of 8 years and an estimated salvage value of $3,300. After 4 years of straight-line depreciation, the asset's total estimated useful life was revised from 8 years to 6 years and there was no change in the estimated salvage value. The depreciation expense in year 5 equals:

Answer 1

Answer:  $5,700

Explanation:

First find the depreciation for the first 4 years.

= (26,100 - 3,300) / 8

= $2,850

Accumulated depreciation in year 4= 2,850 * 4 = $‭11,400‬

Net book value in year 4 = 26,100 - 11,400 = $‭14,700

Revised useful life means only 2 years are left.

New depreciation = (14,700 - 3,300) / 2 ‬= $5,700