The following information is available on a depreciable asset owned by First Bank & Trust:
Purchase date October 1,Year 1
Purchase price $85,000
Salvage value $10,000
Useful life 10 years
Depreciation method straight-line
The asset's book value is $70,000 on October 1,Year 3.On that date,management determines that the asset's salvage value should be $5,000 rather than the original estimate of $10,000.Based on this information,the amount of depreciation expense the company should recognize during the last three months of Year 3 would be:
A)$2,187.50
B)$1,718.75
C)$2,031.25
D)$2,321.43
E)$1,964.29

Question

Quizplus · Accepted Answer

The asset's book value is $70,000 after having been depreciated for two full years. To calculate the new rate of depreciation, subtract the revised salvage value of $5,000 from the current book value of $70,000, yielding $65,000 of revised remaining depreciable cost. Since that amount is to be recognized over the remaining eight years of useful life, depreciation expense for the last quarter of Year 3 would be $2,031.25 [($65,000/8) * 3/12].

The Following Information Is Available on a Depreciable Asset Owned