In 2012, Blanton Company bought equipment with a cost of $160,000, an estimated residual value of $40,000, and an estimated life of 15 years.It was depreciated by the straight-line method for 4 years.Due to obsolescence, it was determined at the beginning of 2016 that the useful life should be shortened by 3 years and the residual value changed to zero.The depreciation expense for 2016 is

Question

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First, we need to calculate the depreciation expense for the first 4 years:

Depreciation = (Cost - Residual Value) / Useful Life

Depreciation = ($160,000 - $40,000) / 15 years = $8,000 per year

Total depreciation for 4 years = $8,000 x 4 = $32,000

Now, we need to calculate the remaining useful life and book value of the equipment at the beginning of 2016:

Original useful life = 15 years

Depreciated years = 4 years

Remaining useful life = 15 years - 4 years = 11 years

Book value = Cost - Accumulated Depreciation

Book value = $160,000 - $32,000 = $128,000

After the revision due to obsolescence:

Revised useful life = 11 years - 3 years = 8 years

Revised residual value = $0

Depreciation = (Book Value - Revised Residual Value) / Revised Useful Life

Depreciation = ($128,000 - $0) / 8 years = $16,000 per year

Therefore, the depreciation expense for 2016 is $16,000. Answer: B

In 2012, Blanton Company Bought Equipment with a Cost of $160,000