Asked by Tiffany Smith on May 08, 2024
Verified
A company used straight-line depreciation for an item of equipment that cost $12,000,had a salvage value of $2,000 and a five-year useful life.After depreciating the asset for three complete years,the salvage value was reduced to $1,200 but its total useful life remained the same.Determine the amount of depreciation to be charged against the equipment during each of the remaining years of its useful life:
A) $1,000
B) $1,800
C) $5,400
D) $2,400
E) $2,000
Straight-Line Depreciation
A method of allocating the cost of a tangible asset over its useful life in equal installments.
Salvage Value
The expected salvage value of an asset at the termination of its useful period.
Depreciated
The reduction in the value of an asset over time due to wear and tear, aging, or obsolescence.
- Ascertain depreciation expenses through diverse techniques, factoring in modifications to estimates of assets, including salvage value and useful life.
Verified Answer
TA
Tahmid Ahmed ChowdhuryMay 10, 2024
Final Answer :
D
Explanation :
The total depreciation for the equipment is $12,000 - $2,000 = $10,000
Depreciation per year = $10,000/5 years = $2,000
Depreciation already charged for 3 years = 3 x $2,000 = $6,000
Book value after 3 years = $12,000 - $6,000 = $6,000
After reducing the salvage value to $1,200, the remaining depreciable amount is $6,000 - $1,200 = $4,800
Remaining useful life = 5 - 3 = 2 years
Depreciation per year for the remaining 2 years = $4,800 / 2 = $2,400
Therefore, the amount of depreciation to be charged against the equipment during each of the remaining years of its useful life is $2,400.
The correct answer is D.
Depreciation per year = $10,000/5 years = $2,000
Depreciation already charged for 3 years = 3 x $2,000 = $6,000
Book value after 3 years = $12,000 - $6,000 = $6,000
After reducing the salvage value to $1,200, the remaining depreciable amount is $6,000 - $1,200 = $4,800
Remaining useful life = 5 - 3 = 2 years
Depreciation per year for the remaining 2 years = $4,800 / 2 = $2,400
Therefore, the amount of depreciation to be charged against the equipment during each of the remaining years of its useful life is $2,400.
The correct answer is D.
Learning Objectives
- Ascertain depreciation expenses through diverse techniques, factoring in modifications to estimates of assets, including salvage value and useful life.
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