Danny's Delivery Service purchased a delivery van for $30,000. The van had an estimated useful life of six years and an estimated residual value of $6,000. After four years of use, the total estimated useful life is revised to seven years. Assuming straight-line depreciation, depreciation expense in year 5 would be (amounts rounded)
A) $2,667.
B) $4,667.
C) $2,000.
D) $1,143.

Question

Quizplus · Accepted Answer

The initial annual depreciation is ($30,000 - $6,000) / 6 = $4,000. After 4 years, accumulated depreciation is 4 * $4,000 = $16,000. The book value is $30,000 - $16,000 = $14,000. With a revised total life of 7 years, 3 years remain. New depreciation is $14,000 / 3 = $4,667.

Danny's Delivery Service Purchased a Delivery Van for $30,000