### Depreciation Expense Calculation ProblemPeavey Enterprises purchased a depreciable asset for $32,000 on April 1, Year 1. The asset will be depreciated using the straight-line method over its four-year useful life. Assuming the asset's salvage value is $4,000, Peavey Enterprises should recognize depreciation expense in Year 2 in the amount of:#### Multiple Choice:- $26,833.33- $28,000.00- $7,000.00- $8,000.00### Detailed Explanation:To calculate the annual depreciation expense using the straight-line method, we apply the following formula:\[ \text{Annual Depreciation Expense} = \frac{\text{Cost of Asset} - \text{Salvage Value}}{\text{Useful Life}} \]Given:- Cost of Asset = $32,000- Salvage Value = $4,000- Useful Life = 4 yearsCalculation:\[ \text{Annual Depreciation Expense} = \frac{\text{\$32,000} - \text{\$4,000}}{\text{4 years}} = \frac{\text{\$28,000}}{\text{4}} = \text{\$7,000} \]Since the asset was purchased on April 1, Year 1, the depreciation expense for the first year should be prorated for 9 months (April to December):\[ \text{Depreciation Expense for Year 1} = \frac{\text{\$7,000} \times \text{9}}{\text{12}} = \text{\$5,250} \]Therefore, the depreciation for the full year in Year 2 would be $7,000. Correct Answer: - $7,000.00

Depreciation: It is the reduction in the value of fixed assets except land due to its continue use…

Answered: O O $26,833.33 $28,000.00

Business

Accounting

O O $26,833.33 $28,000.00

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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