Question

The Peridot Company purchased machinery on January 2, 2016, for $810,000. A five-year life was estimated and no residual value was anticipated. Peridot decided to use the straight-line depreciation method and recorded $162,000 in depreciation in 2016 and 2017. Early in 2018, the company revised the total estimated life of the machinery to eight years.

Determine depreciation for 2018.

Answer 1

Cost of equipment	$     810,000
Less: Salvage value	$                   -
Depreciable value	$     810,000
Life of assets	5 Years
Depreciation per year ($810,000/5)	$     162,000
Depreciation for 2016	$     162,000
Depreciation for 2017	$     162,000
Book value at beginning of 2018 ($810,000-$162,000-$162,000)	$     486,000
Revised life of equipment (8 years - 2years)	6 Years
Depreciation for 2018 ($486,000/6)	$        81,000

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