Question

question 15 5 pts at january 1, 2022, diamond corp. purchased and placed in service a machine costing $264,600. depreciation is recognized using the straight - line method. the machine was expected to have a useful life of 8 years and an estimated salvage value of $9,000. on january 1, 2025, diamond determined that the machine would last an additional 9 years from that date, with the salvage value remaining unchanged. what is the depreciation expense to be recognized for 2025? $17,750 $18,125 $18,750 none of the answers is correct $18,375

Explanation:

Step1: Calculate initial annual depreciation

The formula for straight - line depreciation is $Depreciation=\frac{Cost - Salvage\ value}{Useful\ life}$. Initial cost is $264600$, salvage value is $9000$ and initial useful life is $8$ years. So, initial annual depreciation $=\frac{264600 - 9000}{8}=\frac{255600}{8}=31950$.

Step2: Calculate accumulated depreciation from 2022 - 2024

From January 1, 2022 to January 1, 2025, there are 3 years. Accumulated depreciation $=31950\times3 = 95850$.

Step3: Calculate book value at January 1, 2025

Book value $=Cost - Accumulated\ depreciation=264600 - 95850=168750$.

Step4: Calculate new annual depreciation

The new useful life is 9 years from January 1, 2025 and salvage value remains $9000$. New annual depreciation $=\frac{168750 - 9000}{9}=\frac{159750}{9}=17750$.

Answer:

$17750$