Leos Lawncare purchased equipment on January 1 The cost was

Leo\'s Lawncare purchased equipment on January 1. The cost was $15,000, and the equipment had a residual value of $5,000. The equipment was given a useful life of 10 years. After the end of two years, it was determined that the equipment would be obsolete in 5 more years and the residual value would still be $5,000. What will be the depreciation under the straight-line method to the nearest dollar be for the third year? O A. $1,000 O B. S8,000 O C. $1,600 OD, $1,500

Solution

C) $1,600

Depreciation = (Cost - Salvage value ) / Useful life = ($15,000 - $5,000) / 10 = $1,000

Depreciation for 2 years = $1,000*2 = $2,000

After two years depreciation = ($10,000 - $2,000) / 5 = $1,600