Monet Designs purchased office fixtures on January 1. The cost was $18,000, and the fixtures had a residual value of $2,000. The fixtures were given a useful life of 8 years. After the end of three years, it was determined that the fixtures would be obsolete in 2 more years and their residual value would still be $2,000. What will be the depreciation under the straight-line method to the nearest
dollar be for the fourth year? (Round your final answer to the nearest dollar.)
A) $2,000
B) $2,250
C) $5,000
D) $6,000
C) $5,000
Explanation: step 1: depreciation for first three years, (price - salvage value)/useful life = annual depreciation × 3 years. Step 2: calculate book value, cost - accumulated depreciation. Step 3: (remaining book value - new residual value)/(new useful life - years already depreciated).
Ex: ($18,000 - $2,000) / 8 = $2,000 × 3 = $6,000; $18,000 - $6,000 = $12,000; ($12,000 - $2,000) / (5-3) = $5,000
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