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.
$
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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