Prego would report depreciation in 2014 of:
A)$135,230.
B)$126,000.
C)$108,000.
D)$105,000.

Question

Quizplus · Accepted Answer

Prego purchased equipment for $630,000 and estimated a salvage value of $30,000 over a 5-year useful life, which gives an annual depreciation of ($630,000 - $30,000)/5 = $120,000. However, in 2014, Prego sold equipment with an original cost of $90,000 and $6,000 estimated salvage value, which means the accumulated depreciation up to that point is $84,000 ($90,000 - $6,000). Therefore, Prego would only report depreciation for the remaining equipment ($630,000 - $90,000 = $540,000) over the remaining useful life (5 - 2 = 3 years), which gives an annual depreciation of $180,000 and a total depreciation in 2014 of $126,000 ($180,000 x 2/3).

Prego Would Report Depreciation in 2014 Of