Question

Apex Fitness Club uses straight-line depreciation for a machine
costing $25,300, with an estimated four-year life and a $2,250
salvage value. At the beginning of the third year, Apex determines
that the machine has three more years of remaining useful life,
after which it will have an estimated $1,800 salvage value.

**Required:**

**1.** Compute the machine’s book value at the end of
its second year.

**2.** Compute the amount of depreciation for each of
the final three years given the revised estimates.

Compute the machine’s book value at the end of its second year.

Book Value at the end of year 3 | ________________ |

Cost | blank |

accumulated depreciation 2 years | blank |

Book Value at point of revision | blank |

Compute the amount of depreciation for each of the final three years given the revised estimates.

Revised Depreciation | _____________ |

Book Value at point of revision | Blank |

Revised Salvage Value | Blank |

Remaining Depreciable Cost | Blank |

Years of life remaining | Blank |

Revised annual deprecuiation years 3-5 | Blank |

Answer #1

Compute the machine’s book value at the end of its second year.

Book Value at the end of year 2 | |

Cost | 25300 |

accumulated depreciation 2 years (25300-2250/4*2) | 11525 |

Book Value at point of revision | 13775 |

Compute the amount of depreciation for each of the final three years given the revised estimates.

Revised Depreciation | |

Book Value at point of revision | 13775 |

Revised Salvage Value | 1800 |

Remaining Depreciable Cost | 11975 |

Years of life remaining | 3 |

Revised annual deprecuiation years 3-5 | 3992 |

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