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The <u>correct answer</u> is:
$5,000.
Explanation:
When it is first purchased, the depreciation expense is calculated using the formula:
The cost was $23,000; the salvage value was $3,000; and the useful life was 8 years:
This means the value of the vehicle depreciates $2500 per year.
After 4 years, the vehicle would depreciate 2500(4) = $10,000.
This makes the new value $23000-$10000 = $13000.
Reevaluating the depreciation expense at this point, we use $13000 for the "cost" (current value), $3000 is still the salvage value, and now the total useful life was 6; we take 4 off of this, since it has already been 4 years:
The depreciation expense in year 5 is $5,000.
$5,000.
Explanation:
When it is first purchased, the depreciation expense is calculated using the formula:
The cost was $23,000; the salvage value was $3,000; and the useful life was 8 years:
This means the value of the vehicle depreciates $2500 per year.
After 4 years, the vehicle would depreciate 2500(4) = $10,000.
This makes the new value $23000-$10000 = $13000.
Reevaluating the depreciation expense at this point, we use $13000 for the "cost" (current value), $3000 is still the salvage value, and now the total useful life was 6; we take 4 off of this, since it has already been 4 years:
The depreciation expense in year 5 is $5,000.