A plant asset is acquired by a business on January 1, 2005, for $30,000. The asset's estimated residual value is $8,000 and its estimated life is 5 years. Management chooses to use straight- line depreciation. On January 1, 2007, management revises the total useful life to 6 years and the residual value to be zero. Compute the balance in Accumulated Depreciation on December 31, 2007.

Question

Quizplus · Accepted Answer

The correct answer is B. The balance in Accumulated Depreciation on December 31, 2007, is $14,100. This is calculated as follows:Depreciation expense for 2005 and 2006 = $30,000 - $8,000 / 5 years * 2 years = $14,400Depreciation expense for 2007 = $30,000 - $0 / 6 years * 1 year = $5,000Accumulated Depreciation on December 31, 2007 = $14,400 + $5,000 = $19,400

A Plant Asset Is Acquired by a Business on January