An asset was purchased for $67,000 and originally estimated to have a useful lif
ID: 2423436 • Letter: A
Question
An asset was purchased for $67,000 and originally estimated to have a useful life of 10 years with a residual value of $3,500. After two years of straight-line depreciation, it was determined that the remaining useful life of the asset was only 2 years with a residual value of $1,400. a) Determine the amount of the annual depreciation for the first two years. $ b) Determine the book value at the end of Year 2. $ c) Determine the depreciation expense for each of the remaining years after revision.
Explanation / Answer
An asset was purchased for $60,000 and originally estimated to have a useful life of 10 years with a residual value of $3,000. After two years of straight line depreciation, it was determined that the remaining useful life of the asset was only 2 years with a residual value of $2,000. Calculate this years depreciation using the revised amounts and straight line method.
Annual Depreciation earlier = (Cost-Residual Value)/Useful life
Annual Depreciation earlier = (60000-3000)/10
Annual Depreciation earlier = 5700
Accumulated Depreication = Annual Depreciation earlier*2
Accumulated Depreication = 5700*2
Accumulated Depreication = 11400
Book Value = 60000-11400
Book Value = 48600
This Year Depreciation = (Book Value - revised residual value)/remaining useful life
This Year Depreciation = (48600-2000)/2
This Year Depreciation = $ 23,300
Answer
This Year Depreciation = $ 23,300
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