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manna manufacturing purchased a machine on january 1, 2015 for $ 42,750. at the time of...

manna manufacturing purchased a machine on january 1, 2015 for $ 42,750. at the time of purchase. the machine was estimated to have a life of four years and a residual value of $7,750. on january 1, 2017, munna determined that the machine had a total useful life of seven years (another five years) and a residual value of $ 4500. if manna uses the straight line method of depreciation, what will be the depreciation expense for the machine in 2017?

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Answer #1

Under Straight Line method of Depreciation,

Depreciation = (cost - Residual Valuee) / No. of Useful Years = ( $42750 - $7750) / 4 = $8750 each year depreciation.

Cost 42750

- Depreciation for 2015 (8750)  

Balance at start of 2016 34000

- Depreciation for 2016 (8750)

Balance at start of 2017 25250

Now the book value at the beginning of 2017 is $25250 with the residual value of $4500 And revised life of 5 MORE years. So you should calculate new Depreciation by putting the formula.

Depreciation = (25250 - 4500) / 5 = $4150 is the new value of depreciation from 3rd( 2017) year till 7th year.There is no need to revise depreciation of previous years.

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