Nowling Company buys a machine for $85,000 on January 1, 2012. A residual value
ID: 2470537 • Letter: N
Question
Nowling Company buys a machine for $85,000 on January 1, 2012. A residual value of $5,000 and a useful life of 10 years are estimated at the acquisition date. Nowling uses straight-line depreciation. Early in 2016, Nowling discovers that a competitor has come out with a new product that will reduce demand for Nowling's product. As a result, it estimates that the machine will no longer be of use after 2018. Nowling believes it will be able to sell the machine to a scrap dealer for $8,000 at that time. Prepare a depreciation schedule comparing the original depreciation schedule (for 2012-2021) with the depreciation schedule based on the revised estimates of useful life and residual value (for 2012-2018). Show all amounts in thousands of dollars (rounded to the nearest tenth).Explanation / Answer
Depreciation Schedule for 2012-2021 for 1 Scenerio :
Cost of machine = $85,000
Scrap Value = $5,000
Depreciation = (85000-5000)/10 = $8,000
8,000
Depreciation Schedule for 2012-2018 for 2 Scenerio :
Cost of machine = $85,000
Scrap Value = $8,000
Depreciation = (85000-8000)/7 = $11,000
Date Particular Amout 01.01.2012 Purchase 85,000 31.12.2012 Less : Depreciation 8,000 01.01.2013 Balance 77,000 31.12.2013 Less : Depreciation 8,000 01.01.2014 Balance 69,000 31.12.2014 Less : Depreciation 8,000 01.01.2015 Balance 61,000 31.12.2015 Less : Depreciation 8,000 01.01.2016 Balance 53,000 31.12.2016 Less : Depreciation 8,000 01.01.2017 Balance 45,000 31.12.2017 Less : Depreciation 8,000 01.01.2018 Balance 37,000 31.12.2018 Less : Depreciation 8,000 01.01.2019 Balance 29,000 31.12.2019 Less : Depreciation 8,000 01.01.2020 Balance 21,000 31.12.2020 Less : Depreciation8,000
01.01.2021 Balance 13,000 31.12.2021 Less : Depreciation 8,000 01.01.2022 Scrap Value 5,000Related Questions
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