SportsWorld uses straight-line depreciation for a piece of equipment that cost $12,000,had a trade-in value of $2,000,and a five-year service life.At the end of the third year,the trade-in value was revised to $1,200 and the useful life increased to a total of 6 years.Calculate the amount of depreciation expense for each of the remaining years of the asset's useful life.

Question

Quizplus · Accepted Answer

The annual depreciation expense for the equipment can be calculated as follows:

Cost of asset - salvage value
----------------------------------
 useful life in years

For the first three years, the depreciation expense would be:

($12,000 - $2,000) / 5 = $2,000 per year

At the end of year three, the remaining useful life of the asset was three years and the revised salvage value was $1,200. The remaining depreciation expense can be calculated as:

($12,000 - $1,200)/3 = $3,933.33 per year

Therefore, the total depreciation expense for the remaining three years would be:

$3,933.33 x 3 = $11,800

The annual depreciation expense for each of the remaining years would be:

$11,800 / 3 = $3,933.33

Therefore, the answer is D) $1,600.

SportsWorld Uses Straight-Line Depreciation for a Piece of Equipment That