A company used straight-line depreciation for an item of equipment that cost $12,000,had a salvage value of $2,000,and had a five-year useful life.After depreciating the asset for three complete years,the salvage value was reduced to $1,200 and its total useful life was increased from 5 years to 6 years.Determine the amount of depreciation to be charged against the machine during each of the remaining years of its useful life:
A)$1,000.
B)$1,800.
C)$1,467.
D)$1,600.
E)$2,160.

Question

Quizplus · Accepted Answer

Accumulated Depreciation through the end of year 3:
(Cost of Asset - Salvage Value)/Estimated Useful Life * Years Elapsed
($12,000 - $2,000)/5 * 3 = $6,000
Depreciation, years 4 through 6 = (Cost of Asset - Accumulated Depreciation - Salvage
Value)/Remaining Estimated Useful Life
($12,000 - $6,000 - $1,200/3 = $1,600

A Company Used Straight-Line Depreciation for an Item of Equipment