Change in Estimate: Depreciation Video Lessons

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Problem: On January 1, year 1, L Company purchased an asset that cost $80,000. The asset had an expected useful life of five years and an estimated salvage value of $15,000. L Company 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 $8,000. Based on this information, the depreciation expense to be recognized for year 4 is: a. $12,800 b. $12,500 c. $33,600 d. $16,500

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Problem Details

On January 1, year 1, L Company purchased an asset that cost $80,000. The asset had an expected useful life of five years and an estimated salvage value of $15,000. L Company 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 $8,000. Based on this information, the depreciation expense to be recognized for year 4 is:

a. $12,800

b. $12,500

c. $33,600

d. $16,500

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