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What amount should be recorded as depreciation expense

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Problem 1: Celia Company purchased an equipment on January 1, 2014 at a cost of $60,000. The equipment had an estimated life of 6 years and an estimated residual value of $12,000. On January 1, 2016, the company made a major overhaul of $20,000 to the equipment that extended its useful life by an additional 4 years. Also, the company estimated a new salvage value of $8,000. Celia uses the straight-line depreciation method. What amount should be recorded as depreciation expense each year starting in 2016?

Option 1: $14,000
Option 2: $7,000
Option 3: $8,000
Option 4: $9,000

Reference no: EM132954241

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