On January 1, Year 1, Li Company purchased an asset that cost $75,000. The asset had...
On January 1, Year 1, Li Company purchased an asset that cost $75,000. The asset had an expected useful life of five years and an estimated salvage value of $15,000. Li uses the straight-line method for the recognition of depreciation expense. At the beginning of the fourth year of usage, the company revised its estimated salvage value to $7,500. Based on this information, the amount of depreciation expense to be recognized at the end of Year 4 is:
A. 15,750 B. 12,000 C. 31,500 D. 19,500
Homework Answers
Answer:
| Cost | 75,000 |
| Less: Salvage value | 15,000 |
| Depreciable cost | 60,000 |
| Divided by Useful life | 5 |
| Annual depreciation | 12,000 |
| Total depreciation for 4 years | 48,000 |
| Cost | 75,000 |
| Less: Total depreciation for 3 years | 48,000 |
| Book value at the time of revision | 27,000 |
| Less: Revised salvage value | 7,500 |
| Depreciable cost | 19,500 |
| Divided by Remaining Useful life | 1 |
| Depreciation expense at the end of 4 | 19,500 |
| Option D $19,500 is correct |
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