During Year 3, Stratton Inc. decided to change the useful life and residual value on equipment costing $400,000, based on new information about the equipment's operating capacity and market value. The equipment was purchased January 1, Year 2. The original estimated useful life and residual value were 10 years and $40,000 respectively; the new estimates are 8 years total useful life rather than 10 years, and $20,000 residual value. What is depreciation expense for the year ended December 31, Year 3 (rounded to the nearest dollar)?
A) $49,143
B) $43,000
C) $47,344
D) $54,286

Question

Quizplus · Accepted Answer

The correct answer is A.The depreciation expense for the year ended December 31, Year 3 is $49,143. This is calculated as follows:Depreciation expense = (Cost - Residual value) / Useful life= ($400,000 - $20,000) / 8= $49,143