An asset was purchased for $250,000.It had an estimated salvage value of $50,000 and an estimated useful life of 10 years.After five years of use, the estimated salvage value is revised to $40,000 but the estimated useful life is unchanged.Assuming straight-line depreciation, depreciation expense in year six would be

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The annual depreciation expense is calculated as the cost of the asset (less salvage value) divided by the estimated useful life. In this case, the cost of the asset is $250,000 and the salvage value is now $40,000. The useful life is still 10 years, but since 5 years have already passed, the remaining useful life is 5 years. Therefore, the annual depreciation expense is ($250,000 - $40,000) / 5 = $42,000. Since we are calculating the depreciation expense for year six, we need to subtract the total depreciation recognized in the first five years ($250,000 - $50,000) / 10 x 5 = $100,000) from the total depreciation over the life of the asset ($250,000 - $40,000) / 10 = $21,000. Therefore, the depreciation expense for year six would be $21,000 - $100,000 = $22,000. Choice B is the correct answer.

An Asset Was Purchased for $250,000