Question

# What would the depreciation expense be for the year with the following information: 2018: Plant assets:...

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.

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

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