Angstrom Corporation purchased a truck at a cost of $60,000.It has an estimated useful life of five years and estimated residual value of $5,000.At the beginning of year three,Angstrom's managers concluded that the total useful life would be four years,rather than five.There was no change in the estimated residual value.What is the amount of depreciation that Angstrom should record for year 3 under the straight-line method?
A)$8,250
B)$11,000
C)$15,500
D)$16,500

Question

Quizplus · Accepted Answer

Under the straight-line method, the annual depreciation expense is calculated by subtracting the estimated residual value from the cost of the asset and dividing the result by the estimated useful life.

Therefore, the annual depreciation expense for the truck would be:

($60,000 - $5,000) / 5 = $11,000

However, since the managers have concluded that the useful life of the truck is only four years instead of five, the depreciation expense for year three would be:

($60,000 - $5,000) / 4 = $14,750

Therefore, the amount of depreciation Angstrom should record for year 3 is $14,750, which is closest to option D, $16,500.

Angstrom Corporation Purchased a Truck at a Cost of $60,000