Apex Fitness Club uses straight-line depreciation for a machine costing $22,200,

Question

Apex Fitness Club uses straight-line depreciation for a machine costing $22,200, with an estimated four year life and a $2,700 salvage value. At the beginning of the third year, Apex determines that the machine has three more years of remaining useful life, after which it will have an estimated $2,250 salvage value. Required: 1. Compute the machine's book value at the end of its second year 2. Compute the amount of depreciation for each of the final three years given the revised estimates Complete this question by entering your answers in the tabs below Required 1 Required 2 Compute the amount of depreciation for each of the final three years given the revised estimates. (Do not round intermediate calculations. Round your answers to the nearest whole dollar.) Revised Depreciation (Years 3-5) Book value at point of revision Revised salvage value Remaining depreciable cost Years of Ide remaining Revised annual depreciation years (3 6)

Explanation / Answer

Requirement 1

Annual Depreciation under Straight line method = (Cost of machine - Salvage value)/ useful life of Machine

= (22,200 -2,700)/4

= $4,875

Annual depreciation under straight line method will be same throughout the life of Asset.

So, Book value at the end of its second year is $12,450 (22,000-(4,875X2)).

3 Years

Requirement 2 Revised Depreciation (Years 3- 5) Book value at point of revision        12,450 Revised salvage value 2,250 Remaining depreciable cost        10,200 Years of life remaining

3 Years

Revised annual depreciation years (3-5)           3,400

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