Question

On 1/1/09, AW Consulting Inc. bought a truck for $60,000. The estimated residual value of the truck was $10,000 and the estimated life was ten years. AW Consulting uses the straight line depreciation method when depreciating its vehicles. During January 2012, after the 2011 financial statements were already published and after careful analysis and consideration, AW realized that they should have depreciated the truck over a period of 14 years. Assuming AW accounts for the January event correctly, how much should AW have in accumulated depreciation for this truck as of 12/31/12?

Answer 1

			$
		Purchase price 1/1/2009	60,000
		Annual Depreciation on basis of 10 Years	6,000
		Accumulated Depreciation- 31/12/2011	18,000
		Net Book Value of Truck 31/12/2011	42,000
		Depreciation Expense, 2012	3,818
		Accumulated Depreciation 31/12/2012	21,818
		Net Book Value of Truck 31/12/2012	38,182
Change in depreciation from revision of useful life
Depreciation	=	(Historical Cost - Accumulated Depreciation) - Salvage Value
Expense		Remaining Useful Life
Dep expense, 2012	=	(42,000)/11 = 3818