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