Equipment was purchased at the beginning of 2016 for $1,700,000. At the time of its purchase, the equipment was estimated to have a useful life of six years and a salvage value of $200,000. The equipment was depreciated using the straight-line method of depreciation through 2018. At the beginning of 2019, the estimate of useful life was revised to a total life of ten years (from the beginning Jan 1, 2016) and the expected salvage value was changed to $50,000.
9. The amount to be recorded for depreciation for 2019, reflecting these changes in estimates, is $??
EXACT AMOUNT – DON’T ROUND
Cost of equipment = $1,700,000
Useful life = 6 years
Salvage value = $200,000
Annual depreciation expense = ( cost of equipment- Salvage value)/Useful life
Accumulated depreciation for 3 years = Annual depreciation expense x 3
= 250,000 x 3
Book value of equipment at January 1, 2019 = Cost of equipment - Accumulated depreciation for 3 years
Revised remaining useful life = 7 years
Revised salvage value = $50,000
Revised depreciable cost = Book value of equipment at January 1, 2019- Revised salvage value
Revised annual depreciation expense = Revised depreciable cost/Revised Useful life
The amount to be recorded for depreciation for 2019, reflecting these changes in estimates, is $128,571.4286.
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