Question

​Carpenters, Inc., a manufacturing​ company, acquired equipment on January​ 1, 2017 for $550,000. Estimated useful life...

​Carpenters, Inc., a manufacturing​ company, acquired equipment on January​ 1, 2017 for $550,000. Estimated useful life of the equipment was seven years and the estimated residual value was $16,000. On January​ 1, 2020, after using the equipment for three​ years, the total estimated useful life has been revised to nine total years. Residual value remains unchanged. The company uses the straight minus−line method of depreciation. Calculate depreciation expense for 2020.​ (Round any intermediate calculations to two decimal​ places, and your final answer to the nearest​ dollar.)

A) $61,111

B) $50,857

C) $52,381

D) $59,333

Business   Accounting   
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Answer #1

Answer is B) $50,857

depreciation per year on the date of purchase = cost - residual value / useful life

= 550,000 - 16,000 / 7

= 534,000 / 7

= 76,285.71

depreciation from january 1, 2017 to january 1, 2020

depreciation for 3 years = 76,285.71 x 3 = 228,857.13

on January1,2020 useful life is reviesed for 9 year hence, remaining useful life on this date is 6 year

new depreciation for 2020 = remaining cost - residual value / remaining useful life

= 321,142.87 - 16,000 / 6

= 50,857

remaining cost = cost - depreciation for first 3 years

= 550,000 - 228,857.13

= 321,142.87

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