1. Chattanooga Company purchased a depreciable asset for $80,000 on January 1, 2

Question

1.      Chattanooga Company purchased a depreciable asset for $80,000 on January 1, 2012. The estimated salvage value is $20,000, and the estimated useful life is 5 years. The straight-line method is used for depreciation. On January 1, 2014, the company made a capital expenditure of $16,000 for an addition to the asset. What is depreciation expense for 2014?

a.       $14,400

b.      $12,000

c.       $24,000

d.      $17,333

Chattanooga Company purchased a depreciable asset for $80,000 on January 1, 2012. The estimated salvage value is $20,000, and the estimated useful life is 5 years. The straight-line method is used for depreciation. On January 1, 2014, the company made a capital expenditure of $16,000 for an addition to the asset. What is depreciation expense for 2014? $14,400 $12,000 $24,000 $17,333

Explanation / Answer

Hi,

Please find the answer as follows:

Annual Depreciation = (Cost - Salvage Value)/Years = (80000 - 20000)/5 = 12000

Depreciation on Capital Expenditure = 16000/Remaining Life = 16000/3 = 5333.33 or 5333

Total Depreciation = 12000 + 5333 = 17333

Option D is correct.

Thanks.

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