Exhibit 22-2 On January 1, 2015, Nathan, Inc. purchased a machine for $56,000. Eight-year, straight-line depreciation with no salvage value was used through December 31, 2016. On January 1, 2017, it was estimated that the total useful life of the machine from acquisition date was ten years.

-Refer to Exhibit 22-2. Accordingly, the appropriate accounting change was made in 2017. How much depreciation expense for this machine should Nathan record for the year ended December 31, 2017?
A) $4,200
B) $5,250
C) $7,000
D) $ 0

Question

Exhibit 22-2 On January 1, 2015, Nathan, Inc. purchased a machine for $56,000. Eight-year, straight-line depreciation with no salvage value was used through December 31, 2016. On January 1, 2017, it was estimated that the total useful life of the machine from acquisition date was ten years.

-Refer to Exhibit 22-2. Accordingly, the appropriate accounting change was made in 2017. How much depreciation expense for this machine should Nathan record for the year ended December 31, 2017?
A) $4,200
B) $5,250
C) $7,000
D) $ 0

Quizplus · Accepted Answer

Since the machine was depreciated using the straight-line method, the annual depreciation expense would be $7,000 ($56,000/8 years). However, since the useful life was revised to 10 years, the annual depreciation expense would be adjusted to $5,600 ($56,000/10 years). Since this change was made on January 1, 2017, only 1 year of depreciation expense should be recorded in 2017. Therefore, the depreciation expense for the year ended December 31, 2017 would be $5,250 ($5,600 x 9/12).

Exhibit 22-2 on January 1, 2015, Nathan, Inc