Caricature's Inc.bought new computers on January 1 for $18,000 to improve the quality of their animation.The computers have a useful life of 8 years but Caricature's Inc.thinks that continuing technology developments will likely mean they will replace the computers after 4 years, at which time they will be worth $2,000.If they use straight-line amortization the amortization expense for the first year will be:
A)$2,000
B)$2,250
C)$4,000
D)$4,500

Question

Quizplus · Accepted Answer

To calculate the annual straight-line amortization expense, we need to subtract the residual value from the original cost and divide it by the useful life. In this case, the calculation would be:
($18,000 - $2,000) / 8 years = $2,000
Therefore, the correct answer is C) $4,000.