Helm Corporation purchased a machine with an initial cost of $80,000, a residual value of $5,000, and an estimated useful life of 10 years. At the beginning of the fifth year, Helm spent $10,000 for an extraordinary repair. Following the repair, Helm estimated that the machine had a remaining useful life of 8 years, and that the residual value was unchanged. Calculate depreciation expense on the machine for the fifth year, assuming that Helm uses the straight-line method.
A) $5,625
B) $6,875
C) $7,250
D) $7,500

Question

Quizplus · Accepted Answer

Calculation: ($80,000 - $5,000) ÷ 10 = $7,500; $80,000 - ($7,500 × 4) = $50,000; ($50,000 + $10,000 - $5,000) ÷ 8 = $6,875.

Helm Corporation Purchased a Machine with an Initial Cost of $80,000