Question

On January 1, Year 1, Li Company purchased an asset that cost $30,000. The asset had an expected useful life of five years and an estimated salvage value of $6,000. 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 $3,000. Based on this information, the amount of depreciation expense to be recognized at the end of Year 4 is:

Answer 1

Answer:

$ 6,300

Explanation:

Depreciation provided for first 3 years is

30,000 - 6,000

____________ = 4,800 per year

5 years

WDV at the end of 3rd year = 30,000 - (4,800 x 3) = 15,600

Depreciation at the end of 4th year is calculated as follows

15,600 - 3,000

___________ = 6,300

2 years