Question

After 4 years, a machine had an accumulated depreciation of $40,000. Originally, the machine had an anticipated life of 8 years and a salvage value of $6,000. If the current book value after 4 years is $45,000 and the machine has only 2 years of useable life left, how much will be depreciated in Year 5 and in Year 6 using the straight-line method of depreciation, and assuming the salvage value is still $6,000? (Round your final answer to the nearest dollar.)

A. $10,625 each year

B. $22,500 each year

C. $19,500 each year

D. $9,875 each year

Answer 1

C. $19,500 each year

The annual depreciation for Year 5 and Year 6 using the straight-line method is $19,500 each year after subtracting the salvage value from the current book value and dividing by the remaining useful life.

Step-by-step explanation:

The student's question asks about calculating depreciation using the straight-line method for a machine that originally had a life of 8 years and a salvage value of $6,000. After 4 years, the accumulated depreciation is $40,000 and the book value is $45,000. However, there are only 2 more years of useable life left for the machine instead of 4 years as originally anticipated.

To calculate the annual depreciation expense for Year 5 and Year 6 using the straight-line method, we must first find the total amount to be depreciated over these remaining 2 years. This is obtained by subtracting the salvage value from the current book value. The calculation is $45,000 (current book value) - $6,000 (salvage value) = $39,000 (total amount to depreciate over the next 2 years).

Then, dividing the total amount to be depreciated by the remaining number of years gives us the annual depreciation expense: $39,000 / 2 years = $19,500 per year. Hence, the correct answer is C: $19,500 will be depreciated in both Year 5 and Year 6.