### Depreciation Calculation Example#### Scenario:When originally purchased, a vehicle costing $25,380 had an estimated useful life of 8 years and an estimated salvage value of $2,900. After 4 years of straight-line depreciation, the asset’s total estimated useful life was revised from 8 years to 6 years and there was no change in the estimated salvage value. #### Question:The depreciation expense in year 5 equals:#### Answer Options (Multiple Choice):1. $2,810.00.2. $5,620.00.3. $2,978.00.4. $5,788.00.5. $11,240.00. ---#### Explanation:Straight-line depreciation is calculated using the formula: \[ \text{Annual Depreciation Expense} = \frac{\text{Cost} - \text{Salvage Value}}{\text{Useful Life}} \]1. **Initial Calculation (Original Useful Life of 8 Years):** - Annual Depreciation = $ \frac{25,380 - 2,900}{8} $ - Annual Depreciation = $ \frac{22,480}{8} = 2,810 $. So, for the first 4 years: - Accumulated Depreciation = $ 2,810 \times 4 = 11,240 $. - Book Value after 4 years = Cost - Accumulated Depreciation - Book Value after 4 years = $ 25,380 - 11,240 = 14,140 $.2. **Revised Calculation (Revised Useful Life of 6 Years):** - Remaining Depreciable Amount = Book Value after 4 years - Salvage Value - Remaining Depreciable Amount = $ 14,140 - 2,900 = 11,240 $. - Remaining Useful Life = 6 years - 4 years = 2 years. - Revised Annual Depreciation = $ \frac{11,240}{2} = 5,620 $.Therefore, the depreciation expense in year 5 is **$5,620.00**.---This example demonstrates the adjustment of depreciation expense due to the revision in the estimated useful life of the asset.

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Description: ### Depreciation Calculation Example#### Scenario:When originally purchased, a vehicle costing $25,380 had an estimated useful life of 8 years and an estimated salvage value of $2,900. After 4 years of straight-line depreciation, the asset’s total e

Depreciation: Depreciation means the reduction in the value of an asset over the life of the assets…

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When originally purchased, a vehicle costing $25,380 had an estimated useful life of 8 years and an estimated salvage value of $2,900. After 4 years of straight-line depreciation, the asset's total estimated useful life was revised from 8 years to 6 years and there was no change in the estimated salvage value. The depreciation expense in year 5 equals: Multiple Choice O O O $2,810.00. $5,620.00. $2,978.00. $5,788.00. $11,240.00.

When originally purchased, a vehicle costing $25,380 had an estimated useful life of 8 years and an estimated salvage value of $2,900. After 4 years of straight-line depreciation, the asset's total estimated useful life was revised from 8 years to 6 years and there was no change in the estimated salvage value. The depreciation expense in year 5 equals: Multiple Choice O O O $2,810.00. $5,620.00. $2,978.00. $5,788.00. $11,240.00.

College Accounting, Chapters 1-27 (New in Accounting from Heintz and Parry)

22nd Edition

ISBN:9781305666160

Author:James A. Heintz, Robert W. Parry

Publisher:James A. Heintz, Robert W. Parry

Chapter18: Accounting For Long-term Assets

Section: Chapter Questions

Problem 3CE

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