On January 1, 2013, Leland Company purchased an asset that cost $20,000. The asset had an expected useful life of five years and an estimated salvage value of $4,000. Leland uses the straight-line method for the recognition of depreciation expense. At the beginning of the fourth year of usage, the company revised its estimated salvage value to $2,000. Based on this information, the amount of depreciation expense to be recognized at the end of 2016 is:
A)$4,200.
B)$3,200.
C)$8,400.
D)$5,200.

Question

Quizplus · Accepted Answer

($20,000 cost - $4,000 orig. salvage value)/5 years = $3,200 original annual depreciation expense; $20,000 cost - ($3,200 x 3 years) = $10,400 book value at the time of the revision; ($10,400 book value - $2,000 revised salvage value)/2 remaining years = $4,200 new annual depreciation expense

On January 1, 2013, Leland Company Purchased an Asset That