Ken's Coffee Shop bought equipment for $48,000 on January 1, 2008.Ken estimated the useful life to be 3 years with no salvage value, and the straight-line method of depreciation will be used.On January 1, 2009, Ken decides that the business will use the equipment for 5 years.What is the revised depreciation expense for 2009?

Question

Quizplus · Accepted Answer

Using the straight-line method, the annual depreciation expense would be:
$48,000 / 3 years = $16,000 per year.
However, since Ken decided to use the equipment for 5 years instead of 3, he would need to adjust the useful life and calculate a new annual depreciation expense:
$48,000 / 5 years = $9,600 per year.
To calculate the revised depreciation expense for 2009, we need to take into account that the equipment was already used for one year, so the depreciation expense for 2008 would have been:
$16,000 (original annual depreciation) - $0 (no salvage value) = $16,000 for 2008.
Thus, for 2009, the revised depreciation expense would be:
($48,000 - $16,000) / 4 years = $8,000. 
Therefore, the correct answer is C.

Ken's Coffee Shop Bought Equipment for $48,000 on January 1