JME acquired a depreciable asset on January 1, 2014, for $60,000 cash. At that time JME estimated the asset would last 10 years and have no salvage value. During 2016, JME estimated the remaining life of the asset to be only three more years with a salvage value of $3,000. If JME uses straight-line depreciation, what is the depreciation for 2016? A. $ 6,000 B. $12,000 C. $15,000 D. $16,000

C. $15,000

Explanation:

January 1, 2014;

Cost of asset = $60,000

Initial useful life = 10 years

Depreciation (which is the systematic allocation of cost to an asset for usage) based on initial assessment

= $60,000/10

= $6,000

During 2016 (assuming the date to be January 1, 2016) the asset is estimated to have a remaining life of three more years with a salvage value of $3,000.

The accumulated depreciation as at the time of this assessment

= $6,000 * 2 = $12,000

Carrying amount then = $60,000 - $12,000

= $48,000

Depreciation of 2016 = (carry value - salvage value) / remaining life

= ($48,000 - $3,000) / 3

= $15,000