Question

An asset was purchased for $57,000 and originally estimated to have a useful life of 10 years with a residual value of $4,100. After two years of straight-line depreciation, it was determined that the remaining useful life of the asset was only 2 years with a residual value of $1,640.

a. Determine the amount of the annual depreciation for the first two years.
$

b. Determine the book value at the end of Year 2.
$

c. Determine the depreciation expense for each of the remaining years after revision.
$

Answer 1

Ans:

Annual Depreciation earlier = (Cost-Residual Value)/Useful life

Annual Depreciation earlier = (57000-4100)/10

1.Annual Depreciation earlier = 5290

Accumulated Depreciation = Annual Depreciation earlier*2

Accumulated Depreciation = 5290*2

Accumulated Depreciation =10580

Book Value = 60000-10580

2.Book Value at the end of Year 2= 49420

This Year Depreciation = (Book Value - revised residual value)/remaining useful life

Depreciation for remaining two years = (49420-1640)/2

3.Depreciation for remaining two years = $ 23,890 each year Depreciation.

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