Equipment with a cost of $160,000, an estimated residual value of $40,000, and an estimated life of 15 years was depreciated by the straight-line method for 4 years. Due to obsolescence, it was determined that the remaining useful life should be shortened by 3 years and the residual value changed to zero. The depreciation expense for the current and future years is
A) $11,636
B) $16,000
C) $11,000
D) $8,000

Question

Quizplus · Accepted Answer

Depreciation for the first four years = [(Initial cost - Residual value) / Estimated life] × 4
Depreciation for the first four years = [($160,000 - $40,000) ÷ 15] × 4 = $32,000
Book value at the end of the fourth year = $160,000 - $32,000 = $128,000
Depreciation expense for the current and future years = $128,000 / (15 - 4 - 3) = $16,000

Equipment with a Cost of $160,000, an Estimated Residual Value