Question

19. Big Sips received new information as of January 1, 20Y3, for an asset that was...

19. Big Sips received new information as of January 1, 20Y3, for an asset that was originally purchased for $45,200 on January 1, 20Y1. The original expected useful life was seven years, with an estimated residual value of $4,500. Using the information, Big Sips now estimates the machine will last another 10 years with a residual value of $5,000. If Big Sips uses the straight-line method to determine depreciation expense, calculate the following: a. Accumulated depreciation as of January 1 (round to the nearest whole dollar) b. Revised annual depreciation expense for December 31 (round to the nearest whole dollar)

Homework Answers

Answer #1

Answer

a.

Cost of Asset = $45,200

Salvage Value = $4,500

No. of Useful Years = 7

Depreciation per year = (Cost – Salvage Value) / No. of Useful years

= (45,200 – 4,500) / 7

= $5,814 per year

Accumulated Depreciation after 2 Years = Depreciation per year * 2 Years

= $5,814 * 2

Accumulated Depreciation after 2 Years = $11,628

b.

It is mentioned that now the Asset has $5,000 Residual value and remaining life of 10 Years.

Depreciation for December 31 = [(Cost – Depreciation till now) – New Salvage Value] / No. of useful years

= [(45,200 – 11,628) – 5,000] / 10

= 28,572 / 10

Depreciation for December 31 = $2,857

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