Use the following information for questions.
During calendar 2017, Laertes Corp.sold equipment for $70,000.The equipment had cost $100,000 and had a book value of $52,000 at the time of sale.Data from their comparative statements of financial position are:
-Depreciation expense for 2017 was
A)$86,000.
B)$68,000.
C)$18,000.
D)$12,000.

Question

Use the following information for questions.
During calendar 2017, Laertes Corp.sold equipment for $70,000.The equipment had cost $100,000 and had a book value of $52,000 at the time of sale.Data from their comparative statements of financial position are: 
-Depreciation expense for 2017 was
A)$86,000. 
B)$68,000. 
C)$18,000. 
D)$12,000.

Quizplus · Accepted Answer

The depreciation expense for the year can be calculated using the difference between the book value of the equipment at the beginning and end of the year ($52,000 - $0 = $52,000) divided by the number of years of useful life remaining, which is 3 years (since the equipment was sold in 2017 and its cost was originally $100,000). 
Therefore, the annual depreciation expense is $52,000/3 or $17,333.33 (rounded to the nearest dollar). 
However, depreciation expense for 2017 cannot be calculated based on the above formula, since the equipment was sold in that year. Instead, the depreciation expense for 2017 would be the depreciation expense for the year prior to the year of sale, which is 2016. 
According to the statement of financial position, the book value of the equipment at the beginning of 2016 was $62,000. Therefore, the depreciation expense for 2016 was ($62,000 - $52,000) / 3 years, which equals $3,333.33. 
Thus, the correct answer is B) $68,000 (which is the sum of the 2016 depreciation expense of $3,333.33 and the 2017 depreciation expense of $17,333.33).

Use the Following Information for Questions