Peavey Enterprises purchased a depreciable asset for $28,000 on April 1, Year 1.

Question

Peavey Enterprises purchased a depreciable asset for $28,000 on April 1, Year 1. The asset will be depreciated using the straight-line method over its four-year useful life. Assuming the asset's salvage value is $3,200, Peavey Enterprises should recognize depreciation expense in Year 2 in the amount of:

Peavey Enterprises purchased a depreciable asset for $28,000 on April 1, Year 1. The asset will be depreciated using the straight-line method over its four-year useful life. Assuming the asset's salvage value is $3,200, Peavey Enterprises should recognize depreciation expense in Year 2 in the amount of:

Explanation / Answer

Depreciation to be recognised in each year during four years of useful life is given by

=(COST OF ASSET - SALVAGE VALUE)/USEFUL LIFE IN YEARS

=($28000-$3200)/4

=$6200

So depreciation expense in year 2 in amouunt will be $6200.

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