A company purchased a computer on January 1, 2010 for $20,000 cash. The computer

Question

A company purchased a computer on January 1, 2010 for $20,000 cash. The computer is estimated to have a 5 year useful life, and no salvage value. On January 1, 2011, due to obsolescence, the computer is estimated to have only 2 years of remaining useful life, and the estimated salvage value after the 2 remaining years will be $2,000. Assuming straight line depreciation, the amount of depreciation expense to be recorded on December 31, 2011 will be:
Answer
A. $ 7,000
B. $10,000
C. $ 8,000
D. $ 6,000

Explanation / Answer

20,000/5 = 4,000 per year Depreciation for 2010 equal 4,000 Depreciation after change in life: (16,000-2,000)/2= 7,000 Answer: A, $7,000

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