Question

When originally purchased, a vehicle had an estimated useful life of 10 years. The vehicle cost $61,000 and its estimated residual value is $3,000. After 3 years of straight-line depreciation, the asset’s total estimated useful life was revised from 10 years to 7 years and there was no change in the estimated residual value. The Depreciation Expense in year 4 is:

Multiple Choice

$1,725

$8,011

$8,286

$10,150

Answer 1

Answer :

Where there is a change in useful life of an asset , such change is considered as change in accounting estimation and such change would be provided prospectively over remaining life of the asset

Particulars	Amount($)
Original Cost of Vehicle	61000
Less: Salvage Value	(3,000)
Depreciable Value	58000
Life of Asset	10 years
Depreciation per year	$5,800
(58000/10yrs)
Total Depreciation for 3 years	$17,400
($5800*3)
WDV in the beginning of 4th year	$43,600
($61000-$17400)
Less: Salvage Value	(3,000)
Revised Residual Life	$40,600
Revised Residual Life	4 Years
Revised Depreciation per year	$10,150
($40600/4)