Peavey Enterprises purchased a depreciable asset for $31,000 on April 1, Year 1.

Question

Peavey Enterprises purchased a depreciable asset for $31,000 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 $3,800, what will be the amount of accumulated depreciation on this asset on December 31, Year 3?

Peavey Enterprises purchased a depreciable asset for $31,000 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 $3,800, what will be the amount of accumulated depreciation on this asset on December 31, Year 3?

Explanation / Answer

Annual Depreciation = $(31000 - 3800) / 4 = $6800

The asset has been used in Year 1 for only 9 months i.e. April to December.

Year 1 Depreciation = $6800 * 9/12 = $5100

Year 2 Depreciation = $6800

Year 3 Depreciation = $6800

The amount of accumulated depreciation on this asset on December 31, Year 3:

= $5100 + $6800 + $6800 = $18700

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