Question

Equipment with a cost of $423,100 has an estimated residual value of $48,700, has an estimated useful life of 32 years, and is depreciated by the straight-line method.

**a.** Determine the amount of the annual
depreciation.

$

**b.** Determine the book value after 19 full years
of use.

$

**c.** Assuming that at the start of the year 20
the remaining life is estimated to be 20 years and the residual
value is estimated to be $40,800, determine the depreciation
expense for each of the remaining 20 years.

$

Answer #1

**a.** The amount of the annual depreciation by the
straight-line method = (Cost - residual value) / useful life

= ( 423100-48700)/32

= $ 11,700 per year

Answer = **$ 11,700 per year**

**b.** Depreciation for 19 years =annual
depreciation * number of years

= $ 11,700 per year * 19 years

= $ 222,300

Book value after 19 years = cost - Depreciation for 19 years

=423100- 222,300

= $ 200,800

Answer : **$ 200,800**

**c.** Annual Depreciation = (Book Value as at the
end of 19 years - revised residual Value) / revised useful life

= (200,800-40800)/20

= $ 8,000 per year

Answer : **$ 8,000 per year**

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