Question

Peavey Enterprises purchased afor $22,000 on April 1, Year 1. The asset will bedepreciated using the straight-line method over itsfour-year useful life. Assuming the asset's salvagevalue is $2,000, what willthe amount ofaccumulated depreciation on this asset onDecember 31, Year 3?

Answer 1

The accumulated depreciation on the asset for Peavey Enterprises by December 31, Year 3 using the straight-line method would be $13,750.

Step-by-step explanation:

To calculate the accumulated depreciation on an asset using the straight-line method, you take the cost of the asset minus its salvage value to find the total depreciable amount. Then you divide that amount by the useful life of the asset to determine the annual depreciation expense.

For Peavey Enterprises, the cost of the asset is $22,000, and the salvage value is $2,000.

This gives us a total depreciable amount of

$22,000 - $2,000 = $20,000.

The useful life of the asset is four years.

Therefore, the annual depreciation is

$20,000 / 4 = $5,000 per year.

From April 1, Year 1 to December 31, Year 3 is a total of two years and nine months.

Considering that the depreciation for a full year is $5,000, for two years it would be

2 * $5,000 = $10,000.

For the additional nine months (0.75 of a year), the depreciation would be

0.75 * $5,000 = $3,750.

The accumulated depreciation by the end of December 31, Year 3 would be the sum of these numbers:

$10,000 + $3,750 = $13,750.