Orange Corp. constructed a machine at a total cost of $70 million. Construction was completed at the end of 2009 and the machine was placed in service at the beginning of 2010. The machine was being depreciated over a 10-year life using the sum-of-the-years'-digits method. The residual value is expected to be $4 million. At the beginning of 2013, Orange decided to change to the straight-line method. Ignoring income taxes, what will be Orange's depreciation expense for 2013?
A)$4.8 million.
B)$5.4 million.
C)$6.6 million.
D)$9.4 million.

Question

Quizplus · Accepted Answer

The remaining book value at the beginning of 2013 is $42 million. Using the straight-line method over the remaining 7 years, the depreciation expense for 2013 is $4.8 million.