Equipment costing $105,000 with a salvage value of $21,000 and an estimated life of 8 years has been depreciated using the straight-line method for 2 years.Assuming a revised estimated total life of 6 years and no change in the salvage value, the depreciation expense for Year 3 would be
A)$15,750.
B)$14,000.
C)$21,000.
D)$10,500.

Question

Quizplus · Accepted Answer

The original annual depreciation was ($105,000 - $21,000) / 8 = $10,500. After 2 years, the book value is $105,000 - (2 * $10,500) = $84,000. With a revised life of 6 years, 4 years remain. The new annual depreciation is ($84,000 - $21,000) / 4 = $15,750.

Equipment Costing $105,000 with a Salvage Value of $21,000 and an Estimated