An asset was purchased for $120,000 on January 1, Year 1 and originally estimated to have a useful life of 10 years with a residual value of $10,000. At the beginning of the third year, it was determined that the remaining useful life of the asset was only 4 years with a residual value of $2,000. Calculate the third-year depreciation expense using the revised amounts and straight-line method.
A) $25,000
B) $11,000
C) $24,000
D) $24,500

Question

Quizplus · Accepted Answer

Depreciation for the first two years = [($120,000 - $10,000) ÷ 10] × 2 = $22,000
Book value at the end of the fourth year = $120,000 - $22,000 = $98,000
Depreciation expense for the third year = ($98,000 - $2,000) / 4 = $24,000

An Asset Was Purchased for $120,000 on January 1, Year