On January 1,Year 1,Li Company purchased an asset that cost $80,000.The asset had an expected useful life of five years and an estimated salvage value of $16,000.Li uses the straight-line method for the recognition of depreciation expense.At the beginning of the fourth year,the company revised its estimated salvage value to $8,000.What is the amount of depreciation expense to be recognized during Year 4?
A)$12,800
B)$16,800
C)$33,600
D)$20,800

Question

Quizplus · Accepted Answer

Annual depreciation expense for Years 1 through 3 = (Cost of $80,000 - Salvage value of $16,000)÷ 5 years = $12,800
Book value at end of Year 3 = Cost of $80,000 - Accumulated depreciation of ($12,800 × 3)= $41,600
Depreciation expense for Year 4 = (Book value of $41,600 - Revised salvage value of $8,000)÷ Remaining years of 2 = $16,800

On January 1,Year 1,Li Company Purchased an Asset That Cost