Question

Equipment with a cost of $80,989.00, an estimated residual value of $6,709.00, and an estimated life of 13 years was depreciated by the straight-line method for 6 years. Due to obsolescence, it was determined that the remaining useful life should be shortened by 3 years and the residual value changed to zero. The depreciation expense for the current and future years is

Select the correct answer.

$11,676.48

$5,189.55

$3,592.76

$34,283.08

Answer 1

Annual depreciation before changes
Annual Depreciation = (Cost Of The Asset- Salvage Value)/ Life Of The Asset
= $80989-6709/13 years
= $5713.85 per year
Accumulated depreciation at the end of year 6
=$5713.85*6
=$34283.10
Book value = $80989-34283.10
=$46705.90
Revised depreciation per year
Revised life remaining life = 13-6-3
=4 years
Annual Depreciation = (Cost Of The Asset- Salvage Value)/ Life Of The Asset
= $46705.9-0/4 years
= $11676.48 per year