When originally purchased, a vehicle had an estimated useful life of 8 years. The vehicle cost $23,000 and its estimated residual value is $1,500. After 4 years of straight-line depreciation, the asset's total estimated useful life was revised from 8 years to 6 years and there was no change in the estimated residual value. The depreciation expense in year 5 equals:
A) $5,375.00.
B) $2,687.50.
C) $5,543.75.
D) $10,750.00.
E) $2,856.25.

Question

Quizplus · Accepted Answer

The depreciation expense for the first 4 years is $23,000 - $1,500 / 8 = $2,750 per year. After the revision, the remaining depreciable amount is $23,000 - $1,500 - $2,750 * 4 = $10,750. The depreciation expense for the remaining 2 years is $10,750 / 2 = $5,375 per year.

When Originally Purchased, a Vehicle Had an Estimated Useful Life