The Following Information Is Available on a Depreciable Asset Owned

question 49

Multiple Choice

The following information is available on a depreciable asset owned by Mutual Savings Bank: $$\begin{array} { | l | l | } \hline \text { Purchase date } & \text { July } 1 , \text { Year } 1 \\\hline \text { Purchase price } & \$ 85,000 \\\hline \text { Salvage value } & \$ 10,000 \\\hline \text { Useful life } & 10 \text { years } \\\hline \text { Depreciation method } & \text { straight-line } \\\hline\end{array}$$ The asset's book value is $70,000 on July 1, Year 3. On that date, management determines that the asset's salvage value should be $5,000 rather than the original estimate of $10,000. Based on this information, the amount of depreciation expense the company should recognize during the last six months of Year 3 would be:

• A)$3,750.00
• B)$4,062.50
• C)$7,375.00
• D)$7,812.50
• E)$8,125.00