Question

Equipment with a cost of $61,425, an estimated residual value of $2,925, and an estimated life...

Equipment with a cost of $61,425, an estimated residual value of $2,925, and an estimated life of 15 years was depreciated by the straight-line method for 7 years. Due to obsolescence, it was determined that the remaining useful life should be shortened by 5 years and the residual value changed to zero. The depreciation expense for the current and future years is

a.$11,375

b.$2,844

c.$27,300

d.$2,275

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Homework Answers

Answer #1

Correct answer will be $11375

Detail working for your refrence

Annual Depreciation as SLM= (Original Cost- Residual Value) / Useful Lfe
(61425-2925)/15= $3900
AccumulatedDepreciation for 7 year = 3900X7= $27300
Book value at the end of 7 year = Original Cost - Accumulated Depreciation for 7 year
61425-27300= $34125
Remaining Useful Life= (15year-5 Year)-7year=3 Year
Revised Depreciation Expense for Current year = (Book Value- Residual Value)/ Remaining Useful Life
(34125-0)/3 year= $11375
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