Clayton, inc. purchased a van on january 1, 2016, for $850,000. estimated life of the van was five years, and its estimated residual value was $91,000. clayton uses the straight-line method of depreciation. at the beginning of 2018, the company revised the total estimated life of the asset from five years to four years. the estimated residual value remained the same as estimated earlier. calculate the depreciation expense for 2018.

a.$227,700

b.$113,850

c.$136,600

d.$273,200

Question

Matthew Padilla

Business

25 February, 00:47

Clayton, inc. purchased a van on january 1, 2016, for $850,000. estimated life of the van was five years, and its estimated residual value was $91,000. clayton uses the straight-line method of depreciation. at the beginning of 2018, the company revised the total estimated life of the asset from five years to four years. the estimated residual value remained the same as estimated earlier. calculate the depreciation expense for 2018.

a.$227,700

b.$113,850

c.$136,600

d.$273,200

+2

Answers (1)

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Julien English · Answer 1

A) 227,700

Depreciation per year = (Cost - Residual value) / Useful life

Depreciation per year = ($850,000 - $91,000) / 5 = $151,800

Depreciation provided in the books = $151,800 Ãƒâ€" 2 years = $303,600

Revised depreciation for the year 2018 = ($850,000 - $303,600 - $91,000) / 2 = $227,700