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.If the original expected life remained the same (i.e., 5-years), but at the beginning of Year 4, the salvage value was revised to $8,000, what is the annual depreciation expense for each of the remaining years?
A)$5,440
B)$27,200
C)$13,600
D)$14,800

Question

Quizplus · Accepted Answer

Under the straight-line method, the annual depreciation expense is calculated as:
(cost - salvage value) / useful life

Original annual depreciation expense = (82,000 - 4,000) / 5 = $15,600

After the change in salvage value, the remaining useful life is 2 years (5 - 3). The new annual depreciation expense is:
(82,000 - 8,000) / 5 = $14,800

For the remaining years:
Year 4: $14,800
Year 5: $14,800

Therefore, the annual depreciation expense for each of the remaining years is $13,600 (C).

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