On January 1, 2014, Detroit Ltd.bought machinery for $500,000.They used straight-line depreciation for this machinery, over an estimated useful life of ten years, with no residual value.At the beginning of 2017, Detroit decided the estimated useful life of this machinery was only eight years (from the date of acquisition), still with no residual value.For calendar 2017, the depreciation expense for this machinery is
A)$50,000.
B)$62,500.
C)$70,000.
D)$100,000.

Question

Quizplus · Accepted Answer

The annual straight-line depreciation expense can be calculated as: 
$500,000 / 10 years = $50,000 per year

However, since the estimated useful life was revised to 8 years, the remaining useful life at the beginning of 2017 was 8 - 3 = 5 years.

So, the depreciation expense for 2017 will be:
$500,000 / 8 years * 5/12 (for 5 months of usage in 2017) = $31,250 for 2017

Total accumulated depreciation at the end of 2017 will be:
$50,000 x 3 + $31,250 = $181,250

Therefore, the depreciation expense for 2017 is $70,000 ($181,250 - $111,250).