Question

What would the depreciation expense be for the year with the following information:

2018:

Plant assets: 325,000

Accumulated depreciation: (65,000)

2017:

Plant assets: 250,000

Accumulated depreciation: (60,000)

- Old plant assets costing $25,000 were sold for $10,000 cash when book value was $13,000.

Answer 1

Old asset original cost is $25,000 and book value is $13,000. Its accumulated depreciation is difference between cost and book value, $12,000.

Accumulated depreciation increases by the amount of depreciation expense and decreases by the accumulated depreciation related to disposed assets.

Accumulated depreciation opening balance is $60,000. By disposing of assets with accumulated depreciation of $12,000, balance in accumulated depreciation should have reduced to $48,000. But the closing balance is $65,000 which means depreciation expense has increased the $48,000 balance to $65,000. Thus, depreciation is the amount of difference between $65,000 and $48,000 that is $17,000.

Depreciation expense for the year is $17,000.

Below is the reconciliation:

Accumulated depreciation
Opening balance	60000
Add: Depreciation	17000
Less: disposals	12000
Closing balance	65000