Question

On January 1, 2019, Happy Company purchased equipment for $114,000. The equipment was assigned a useful...

On January 1, 2019, Happy Company purchased equipment for $114,000.
The equipment was assigned a useful life of 15 years and a $6,000
residual value. Happy Company will use the straight-line method to
depreciate the equipment.

On January 1, 2023, Happy Company revised the life of the equipment
from 15 to 20 years.

On January 1, 2026, Happy Company revised the life of the equipment
from 20 to 12 years.

On January 1, 2028, Happy Company spent $58,000 to overhaul the
equipment. This capital expenditure resulted in Happy Company
changing the life of the equipment from 12 years to 25 years and
adjusting the residual value to be $5,650 at the end of the 25
years.

Calculate the book value of the equipment at December 31, 2027.
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Answer #1

Caluculation:

Cost of the asset = $114000

salvage value =$6000

Depreciation = (cost - salvage value)/no of years

=($114000-6000)/15

=$7200

Written down value as on jan 20123 = $114000-$28800

=$85200

Depreciation =(Cost -salvage value - Accumulated deprecition)/No. of years

($114000-$28800-$6000)/(20-4)

=$4950

Depreciation for 3 years = $4950*3 =$14850

Written down value = $114000- $28800-$14850

=$70350

Depreciation for 2026 =($70350-$6000) /(12-7)

= $12870

Depreciation for 2027= $12870

BOOK VALUE = $ $70350 - 25740

=$44610

  

=

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