Question

Chattanooga Company purchased a depreciable asset for $80,000 on January 1, 2015. The estimated salvage value is $20,000, and the estimated useful life is 5 years. The straight-line method is used for depreciation. On January 1, 2017, the company made a capital expenditure of $16,000 for an addition to the asset. What is depreciation expense for 2017?(a)$12,000.(b)$14,400.(c)$24,000.(d)$25,333.

Answer 1

Answer: $17,333

Explanation: The above answer can be calculated as follows :-

Depreciation till
`=(80,000\:-20,000)/(5)\:* 2\:=\$24,000`

2015 TO 2017

now,

value of asset in 2017 = $80,000 - $24,000 + $16,000 = $72,000

therefore,

Depreciation in 2017
`=(72,000\:-20,000)/(3)\:* 2\:=\$17,333`