Question

.An asset that cost $15500 with a residual value of $1200 and a useful life of 5 years was depreciated for two years using the straight-line method. In the third year, the useful life was determined to be 2 years longer than initially expected. Depreciation in the third year would be $2860. $2043. $1956 $1716

Answer 1

The asset is being depreciated using the straight-line method. The initial cost, residual value, and useful life are given. The annual depreciation expense in the third year can be calculated using the accumulated depreciation and the remaining useful life.

Step-by-step explanation:

The asset in question is being depreciated using the straight-line method. The formula for straight-line depreciation is:

Depreciation expense = (Cost - Residual value) / Useful life

In this case, the initial cost of the asset is $15,500 and the residual value is $1,200. The useful life initially estimated is 5 years. So, the annual depreciation expense is (15500 - 1200) / 5 = $2,660.

In the third year, it is determined that the useful life of the asset is actually 2 years longer than initially expected. So, the remaining useful life is 5 years - 2 years = 3 years. The accumulated depreciation after 2 years is 2 * $2,660 = $5,320. To determine the depreciation expense in the third year, we subtract the accumulated depreciation from the cost of the asset: $15,500 - $5,320 = $10,180. The annual depreciation expense in the third year is $10,180 / 3 = $3,393.33, which is not one of the options provided.

Answer 2

The correct depreciation in the third year after adjusting for the extended useful life is $1,716. This is calculated by deducting the accumulated depreciation from the original cost to get the book value and then spreading the remaining amount over the new remaining useful life.

Step-by-step explanation:

The student's question involves calculating the depreciation of an asset after an adjustment to its useful life. The asset originally cost $15,500 with a residual value of $1,200 and had an expected useful life of 5 years. The straight-line method of depreciation was used for two years. In the third year, the useful life of the asset was determined to be 2 years longer than initially expected.

To calculate the depreciation in the third year, first, we need to calculate the total depreciation for the first two years. The annual depreciation for the first two years is ($15,500 - $1,200) / 5 years = $2,860 per year. After two years, the accumulated depreciation is $2,860 * 2 = $5,720. The book value at the beginning of the third year is $15,500 - $5,720 = $9,780.

With the extension of the useful life by 2 more years, the new total useful life becomes 7 years. Since depreciation has already been charged for 2 years, the remaining useful life is 5 years. Therefore, the new annual depreciation from the third year onward is ($9,780 - $1,200) / 5 years = $1,716.