bert Tringale: Attempt 1 Question 8 (6 points) D On January 1, 2016, Alpha Compa

Question

bert Tringale: Attempt 1 Question 8 (6 points) D On January 1, 2016, Alpha Company purchased equipment for $17,000 with an estimated 10-year life and no salvage value. It was determined that the straight-line method of depreciation would be used. Alpha has a December 31 fiscal year end. During 2020, Alpha determined that the useful life for this equipment should be only 7 years. Using this information, how much is: (Enter only whole dollar values.) 1. the 2020 depreciation expense 2. the accumulate depreciation after the fiscal year 2020 adjusting entry 3. the book value of the truck after the fiscal year 2020 adjusting entry

Explanation / Answer

If the life is 10 years:

Depreciation expense = Equipment cost / Life

                                    = $17,000 / 10

                                    = $1,700

The year 10 ends at 31/12/2025. During the year 2020, the equipment completed 4 years of life.

If the life is 7 years:

Depreciation expense = Equipment cost / Life

                                    = $17,000 / 7

                                    = $2,429

The year 7 ends at 31/12/2022. During the year 2020, the equipment completed 4 years of life.

Q1) Depreciation for 2020 is the aggregate of $2,429 and $2,916 (as calculated below). Therefore, the required amount is ($2,429 + $2,916 =) $5,345 (Answer).   

Q2) Accumulated depreciation till 31/12/2019 (4 years) = $1,700 × 4 = $6,800

Accumulated depreciation would have been if there is 7 year life = $2,429 × 4 = $9,716

Accumulated depreciation should increase by = 9,716 – 6,800 = $2,916.

This is to be increased by debiting the depreciation expense and crediting the accumulated depreciation account for the amount of $2,916.

Accumulated depreciation after adjustment = Depreciation (as 7 years life) × Number of year since 1/1/2016 till 31/12/2020

                                                                        = $2,429 × 5

                                                                        = $12,145 (Answer)

Q3) Required book value = Equipment cost – Accumulated depreciation till date

                                           = 17,000 – 12,145

                                           = $4,855 (Answer)

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