Canliss Mining uses the retirement method to determine depreciation on its office equipment. During 2011, its first year of operations, office equipment was purchased at a cost of $14,000. Useful life of the equipment averages four years and no salvage value is anticipated. In 2013, equipment costing $5,000 was sold for $600 and replaced with new equipment costing $6,000. Canliss would record 2013 depreciation of:
A)$3,500.
B)$4,400.
C)$5,400.
D)None of the above is correct.

Question

Quizplus · Accepted Answer

The depreciation for the first year (2011) would be $3,500 ($14,000 divided by 4 years). For 2012, the second year, the depreciation would be $3,500 again. In 2013, the equipment costing $5,000 is sold for $600. The equipment's carrying amount is $4,400 ($5,000 - $600). Since the useful life is four years, the depreciation each year would be $1,100 ($4,400 divided by 4 years). Therefore, the total depreciation for 2013 would be $4,400 ($3,500 + $1,100) for the new equipment.

Canliss Mining Uses the Retirement Method to Determine Depreciation on Its