An asset was purchased for $250000. It had an estimated salvage value of $50000 and an estimated useful life of 10 years. After 5 years of use the estimated salvage value is revised to $40000 but the estimated useful life is unchanged. Assuming straight-line depreciation depreciation expense in year 6 would be

A) $30000.
B) $22000.
C) $15000.
D) $21000.

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Garima Kapoor · Accepted Answer

Final Answer : B, Explanation :  The original annual depreciation expense is calculated based on the initial cost, salvage value, and useful life: ($250,000 - $50,000) / 10 = $20,000 per year for the first 5 years. After 5 years, the book value of the asset is $250,000 - ($20,000 * 5) = $150,000. With the revised salvage value of $40,000 and 5 remaining years, the new annual depreciation is ($150,000 - $40,000) / 5 = $22,000.

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