Farmer Company purchased machine on January 1, Year 1 for $82,000. The machine is estimated to have a 5-year life and a salvage value of $4,000. The company uses the straight-line method.At the beginning of Year 4, Farmer revised the expected life to eight years. What is the annual amount of depreciation expense for each of the remaining years in the machine's life?
A)$6,240
B)$4,400
C)$7,040
D)$3,900

Question

Quizplus · Accepted Answer

The correct answer is A. The annual amount of depreciation expense for each of the remaining years in the machine's life is $6,240.Explanation:The original cost of the machine is $82,000. The salvage value is $4,000. The original estimated life is 5 years. The revised estimated life is 8 years. The annual amount of depreciation expense for the first 3 years is $15,600 ($82,000 - $4,000) / 5 years = $15,600. The annual amount of depreciation expense for the remaining 5 years is $6,240 ($82,000 - $4,000 - $15,600) / 5 years = $6,240.

Farmer Company Purchased Machine on January 1, Year 1 for $82,000