Depreciation: Merle’s Cabaret bought a used piano paying $22,000 cash and signin

Question

Depreciation:

Merle’s Cabaret bought a used piano paying $22,000 cash and signing a note payable for $10,000.  Merle also paid $2,000 to have the piano shipped to Merle’s facility. The piano had an estimated remaining life of nine years when acquired and had an estimated salvage value of $10,000.  The piano was placed in service on March 1, Year 1.  Merle uses the straight-line method for depreciating equipment.  Merle has an accounting year ending on December 31.

Required: Determine Merle’s Depreciation Expense for this piano for years ending December 31, Year 1, and December 31, Year 2.  Explanations and calculations not required.

$__________Year 1

$__________Year 2

On January 1, Year 4, Merle changed the estimated salvage value for the piano to $5,000.

Determine Merle’s Depreciation Expense on this piano for the period ending December 31, Year 4.  Explanations and calculations not required.

$__________ Year 4

Explanation / Answer

1)Depreciation = (cost - salvage) / useful life

cost = 22000 + 10000 +2000 = 34000

                           = (34000 - 10000 ) / 9

                           = 24000 /9

                           = 2666.67

year 1 = 2666.67 * 10 /12 = 2222.23                  [since used only for 10 months 1mar -31 dec]

year 2 = 2666.67

2)Book value at beginning of year 4 = 34000 - 2222.23 - 2666.67 - 2666.67 = 26444.43

Remaining years = 9 - 3 = 6

Depreciation for year 4 = (26444.43 - 5000 ) /6

                                             = 21444.43/6

                                            = 3574.07

Related Questions

Navigate

• Browse (All)
• Browse D
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.