Question

# Peavey Enterprises purchased a depreciable asset for \$32,000 on April 1, Year 1. The asset will...

Peavey Enterprises purchased a depreciable asset for \$32,000 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 \$4,000, what will be the amount of accumulated depreciation on this asset on December 31, Year 3?

Multiple Choice

\$19,250

\$5,833

\$5,833

\$7,000

\$23,333

Solution:

Annual Depreciation = (cost - salvage) / 4 = (\$32000 - \$4000) / 4 = \$7,000

Depreciation for Year 1 (for 9 months) = \$7000*9/12 = \$5,250

Accumulated Depreciation on December 31, Year 3 = \$5250 + \$7000 + \$7000 = \$19,250

Hence first option is correct.

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