An asset was purchased for $100,000 on January 1, Year 1 and originally estimated to have a useful life of 12 years with a residual value of $10,000. At the beginning of the third year, it was determined that the remaining useful life of the asset was only 4 years with a residual value of $2,800. Calculate the third-year depreciation expense using the revised amounts and straight-line method. a.$20,550.00 b.$21,550.00 c.$21,050.00 d.$19,550.00

A

Explanation:

The following steps would be taken to determine the answer

Straight line depreciation expense = (Cost of asset - Salvage value) / useful life

($100,000 - $10,000) / 12 = $7500

Depreciation expense each year is $7500

Accumulated depreciation = $7500 x 2 = $15,000

Book value at the beginning of year 3 = $100,000 - $15,000 = $85,000

($85,000 - $2800) / 4 = $20,550

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