An asset was purchased for $58,000 and originally estimated to have a useful life of 10 years with a residual value of $3,000. After two years of straight-line depreciation, it was determined that the remaining useful life of the asset was only 2 years with a residual value of $2,000. What will be the annual depreciation for the asset?
A) $5,500
B) $5,800
C) $22,500
D) $23,500

Question

Quizplus · Accepted Answer

$5,500 (Cost - Residual Value) / Useful Life = ($58,000 - $3,000) / 10
$47,000 [Initial cost - Total depreciation for Year 1 and 2 = $58,000 - ($5,500 × 2)]
$22,500 [(Book value at the end of Year 2 - Revised residual value) / Revised useful life = ($47,000 - $2,000) / 2]

An Asset Was Purchased for $58,000 and Originally Estimated to Have