Final answer:
The depreciation expense for Chattanooga Company for 2014 is $17,333.33, calculated after adding the capital expenditure of $16,000 to the original cost and subtracting accumulated depreciation.
Step-by-step explanation:
The student is asking for the calculation of the depreciation expense for Chattanooga Company's asset for the year 2014 after an addition was made to the asset.
Initially, the asset was purchased for $80,000 with a salvage value of $20,000 and a useful life of 5 years. Using the straight-line depreciation method, the annual depreciation expense from 2012 to 2013 would be:
(Cost - Salvage Value) / Useful Life = ($80,000 - $20,000) / 5 = $12,000 per year.
On January 1, 2014, the company made a capital expenditure of $16,000, which increased the asset's value. The new depreciable base for 2014 forward is:
(Original Cost + Capital Expenditure - Accumulated Depreciation) = ($80,000 + $16,000) - (2 * $12,000) = $72,000.
The revised annual depreciation expense for 2014, assuming the asset still has 3 years of useful life remaining, would be:
(New Depreciable Base - Salvage Value) / Remaining Useful Life = ($72,000 - $20,000) / 3 = $17,333.33.
Therefore, the depreciation expense for Chattanooga Company for the year 2014 is $17,333.33.