On January 1,2011,Caravanos Company purchased for $320,000 a machine with a useful life of ten years and no salvage value.The machine was depreciated by the double-declining-balance method,and the carrying amount of the machine was $204,800 on December 31,2012.Caravanos changed to the straight-line method on January 1,2013.Caravanos can justify the change.What should be the depreciation expense on this machine for the year ended December 31,2014?
A) $20,480
B) 25,600
C) 32,000
D) 52,480

Question

Quizplus · Accepted Answer

To calculate the depreciation expense for the year ended December 31, 2014, after the change to the straight-line method, we first need to determine the book value of the machine as of January 1, 2013, which is given as $204,800. Since the machine originally cost $320,000 and has no salvage value, and the useful life is 10 years, we need to spread the remaining book value over the remaining useful life. By January 1, 2013, the machine had been in use for 2 years, leaving 8 years of useful life. Therefore, the annual straight-line depreciation expense from 2013 onwards is $204,800 / 8 = $25,600.

On January 1,2011,Caravanos Company Purchased for $320,000 a Machine with a Useful