Question

Mellow Co. depreciates a $12,000 asset over five years, using the straight-line method with no salvage value. At the beginning of the fifth year, it is determined that the asset will last another four years. What amount should Mellow report as depreciation expense for year five?

Answer 1

$600

Step-by-step explanation:

Using the straight-line depreciation method:

Cost amount $12,000:

useful life five years

depreciation per year: =$ 12000/ 5

=$ 2,400.00

Book value at the beginning of year five:

=cost price minus four years of depreciation

=$12,000-($2400 x 4)= $ 12,000- $ 9,600

=$2, 400.00

Another four years of useful life:

Depreciation = Book value /4

=$2400/4

= $600