On January 1,2012 Eller Company purchased an asset that had cost $24,000.The asset had an 8-year useful life and an estimated salvage value of $1,000.Eller depreciates its assets on the straight-line basis.On January 1,2016 the company spent $6,000 to improve the quality of the asset.Based on this information,the recognition of depreciation expense in 2016 would

Question

Quizplus · Accepted Answer

The depreciation expense for 2016 would be calculated based on the new book value of the asset after the improvement. The improvement cost is added to the book value, and the remaining useful life is adjusted. This expense reduces total equity by the amount of the depreciation expense, which is $4,375.

On January 1,2012 Eller Company Purchased an Asset That Had