[The following information applies to the questions displayed below.]

Farmer Company purchased equipment on January 1, Year 1 for $82,000. The machines are estimated to have a 5-year life and a salvage value of $4,000. The company uses the straight-line method.

-At the beginning of Year 4,Farmer revised the expected life to eight years.What is the annual amount of depreciation expense for each of the remaining years in the machine's life?
A)$6,240
B)$4,400
C)$7,040
D)$3,900

Question

[The following information applies to the questions displayed below.]

Farmer Company purchased equipment on January 1, Year 1 for $82,000. The machines are estimated to have a 5-year life and a salvage value of $4,000. The company uses the straight-line method.

-At the beginning of Year 4,Farmer revised the expected life to eight years.What is the annual amount of depreciation expense for each of the remaining years in the machine's life?
A)$6,240
B)$4,400
C)$7,040
D)$3,900

Quizplus · Accepted Answer

Annual depreciation expense for Years 1 through 3 = (Cost of $82,000 - Salvage value of $4,000)÷ 5 years = $15,600
Book value at end of Year 3 = Cost of $82,000 -Accumulated depreciation of ($15,600 × 3)= $35,200
The expected life is now 8 years and,so,there are 5 years remaining.
Annual depreciation expense for Years 4 through 8 = (Book value of $35,200 - Salvage value of $4,000)÷ Remaining years of 5 = $6,240

[The Following Information Applies to the Questions Displayed Below