Question

Swindall Industries uses straight-line depreciation on all of its depreciable assets. The company records annual depreciation...

Swindall Industries uses straight-line depreciation on all of its depreciable assets. The company records annual depreciation expense at the end of each calendar year. On January 11, 2014, the company purchased a machine costing $94,000. The machine’s useful life was estimated to be 12 years with an estimated residual value of $19,400. Depreciation for partial years is recorded to the nearest full month.

In 2018, after almost five years of experience with the machine, management decided to revise its estimated life from 12 years to 20 years. No change was made in the estimated residual value. The revised estimate of the useful life was decided prior to recording annual depreciation expense for the year ended December 31, 2018.

A. Record depreciation for the first year

B. Record depreciation for the year 2015

C. Record Depreciation for the year 2016 and 2017

D. Record depreciation for the 5th year, based on revised estimate of useful life

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Answer #1
Calculation of Annual Depreciation 2014-2017
Cost $       94,000
Salvage $       19,400
Life 12 Years
Annual Depreciation =(Cost-Salvage)*Months/(Life*12)
Year Ending 2014 2015 2016 2017
Months 11 12 12 12
Annual Depreciation $ 5,699 $ 6,217 $ 6,217 $ 6,217
Calculation of Annual Depreciation 2018
Net Block $       69,651
Salvage $       19,400
Revised Life 20 Years
Depreciation 2018 $          2,513
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