After two years, how much accumulated depreciation would there be?

After two years, how much accumulated depreciation would there be?

• A. $10,000 ($5,000 x 2)
• B. $20,000 ($10,000 x 2)
• C. $40,000 ($10,000 x 4)
• D. There would be no change in accumulated depreciation

Answer: (B)

Accumulated depreciation is the total depreciation expense recognized since the asset was put into service. It increases by the amount of depreciation recorded each year, so after two years you add two years’ worth of depreciation. If the asset has an annual depreciation expense of $10,000, then two years of depreciation amount to 2 × $10,000 = $20,000. That’s why the accumulated depreciation would be $20,000. The other numbers don’t fit because they imply different annual depreciation or more time passing, or no depreciation at all. For example, $5,000 per year for two years would total $10,000, four years would give $40,000, and no change would ignore depreciation that has already been recorded.

Accumulated depreciation is the total depreciation expense recognized since the asset was put into service. It increases by the amount of depreciation recorded each year, so after two years you add two years’ worth of depreciation.

If the asset has an annual depreciation expense of $10,000, then two years of depreciation amount to 2 × $10,000 = $20,000. That’s why the accumulated depreciation would be $20,000.

The other numbers don’t fit because they imply different annual depreciation or more time passing, or no depreciation at all. For example, $5,000 per year for two years would total $10,000, four years would give $40,000, and no change would ignore depreciation that has already been recorded.