A firm purchased an office machine for $4,600, estimated that it will use the machine for 15 years, and estimated a salvage value of $100.On December 31 of the sixth year, before closing the books for the year, the firm analyzed its estimates of useful life and salvage value.In light of new information, the firm estimated that the machine will have a total useful life of only 10 years, and the salvage estimate of $100 remains reasonable. The new estimate of the remaining life is five years (the year just ended plus the next four).The depreciation entry on December 31 of the sixth year and each year thereafter is:
A)Depreciation Expense............ 300
Accumulated Depreciation ......................300
B)Depreciation Expense...................... 600
Accumulated Depreciation ...................600
C)Accumulated Depreciation .................300
Depreciation Expense........................... 300
D)Accumulated Depreciation ...................600
Depreciation Expense......................... 600
E)none of the above

Question

A firm purchased an office machine for $4,600, estimated that it will use the machine for 15 years, and estimated a salvage value of $100.On December 31 of the sixth year, before closing the books for the year, the firm analyzed its estimates of useful life and salvage value.In light of new information, the firm estimated that the machine will have a total useful life of only 10 years, and the salvage estimate of $100 remains reasonable. The new estimate of the remaining life is five years (the year just ended plus the next four).The depreciation entry on December 31 of the sixth year and each year thereafter is:
A)Depreciation Expense............ 300 
Accumulated Depreciation ......................300
B)Depreciation Expense...................... 600 
Accumulated Depreciation ...................600
C)Accumulated Depreciation .................300 
Depreciation Expense........................... 300
D)Accumulated Depreciation ...................600 
Depreciation Expense......................... 600
E)none of the above

Quizplus · Accepted Answer

The new estimate of the remaining life is five years (the year just ended plus the next four). The depreciable amount of the machine is $4,500 ($4,600 - $100). Using the straight-line method, the annual depreciation expense will be $900 ($4,500 / 5 years). For the year just ended, the depreciation expense will be half of the annual amount, or $450 ($900 / 2). Therefore, the depreciation entry on December 31 of the sixth year and each subsequent year will be:

Depreciation Expense.............................. $900
Accumulated Depreciation ........................ $900

For the year just ended, the entry will be:

Depreciation Expense.............................. $450
Accumulated Depreciation ........................ $450

A Firm Purchased an Office Machine for $4,600, Estimated That