Question

On January 1, 2015, an asset was acquired for $30,000. Its useful life was expected to be 10 years and the salvage value is expected to be $0. After four years of use, the company realized the asset would be useful for only three more years. (In other words, the total useful life of the asset will be seven years instead of the original 10 years.) The company uses the straight-line method of depreciation. The Depreciation Expense in each of the years 2019, 2020, and 2021 will be:

A) $4,286
B) $4,000
C) $3,000
D) $2,000

Answer 1

The Depreciation Expense in each of the years 2019, 2020, and 2021 will be A)$4,286.

Step-by-step explanation:

The Depreciation Expense in each of the years 2019, 2020, and 2021 will be:

1. $4,286
2. $4,000
3. $3,000
4. $2,000

To calculate the depreciation expense, we first need to determine the annual depreciation amount.

The asset was acquired for $30,000 and has a useful life of 7 years.

The salvage value is $0, so the depreciable base is $30,000 - $0 = $30,000.

Therefore, the annual depreciation amount is $30,000 / 7 years = $4,286.

Since the asset has been used for 4 years already, the remaining useful life is 7 years - 4 years = 3 years.

Therefore, the Depreciation Expense in each of the years 2019, 2020, and 2021 will be $4,286.