An asset was purchased for $100,000. It had an estimated salvage value of $25,000 and an estimated useful life of 10 years. After 5 years of use, the estimated salvage value is revised to $20,000 but the estimated useful life is unchanged. Assuming straight-line depreciation, depreciation expense in Year 6 would be
A) $15,000.
B) $10,625.
C) $8,500.
D) $12,500.

Question

Quizplus · Accepted Answer

The book value at the end of Year 5 is $100,000 - ($7,500 * 5) = $62,500. The new depreciable amount is $62,500 - $20,000 = $42,500. With 5 years remaining, the annual depreciation is $42,500 / 5 = $8,500.

An Asset Was Purchased for $100,000