Equipment costing $60,000 with a residual value of $6,000 and an estimated life of eight years has been depreciated using the straight-line method for two years.Assuming a revised estimated total life of five years,the depreciation expense for year 3 would be
A)$6,750.
B)$9,000.
C)$13,500.
D)$10,800.

Question

Quizplus · Accepted Answer

To calculate depreciation expense for year 3, we first need to determine the remaining depreciable amount of the equipment. 
Original cost = $60,000
Residual value = $6,000
Depreciable amount = $60,000 - $6,000 = $54,000

The equipment has been depreciated for 2 years using the straight-line method, so the accumulated depreciation is:
Depreciation per year = Depreciable amount / Estimated life = $54,000 / 8 = $6,750
Accumulated depreciation = Depreciation per year x Years depreciated = $6,750 x 2 = $13,500

If we revise the estimated total life to 5 years, then the remaining depreciable amount would be:
Remaining life = Estimated life - Years depreciated = 5 - 2 = 3
Remaining depreciable amount = Depreciable amount - Accumulated depreciation = $54,000 - $13,500 = $40,500

The depreciation expense for year 3 can now be calculated using the straight-line method:
Depreciation per year = Remaining depreciable amount / Remaining life = $40,500 / 3 = $13,500

Therefore, the answer is C) $13,500.

Equipment Costing $60,000 with a Residual Value of $6,000 and an Estimated