Question

Canliss Mining uses the replacement method to determine depreciation on its office equipment. During 2016, its first year of operations, office equipment was purchased at a cost of $29,000. Useful life of the equipment averages four years and no salvage value is anticipated. In 2018, equipment costing $5,900 was sold for $780 and replaced with new equipment costing $6,500. Canliss would record 2018 depreciation of:

a) none of these answer choices are correct b) 5720 c) 5120 d) 3550

Answer 1

	CALCULATION OF THE DEPRECIATION AS PER STRAIGHT LINE METHOD
	Purchase Cost of Machine	$                29,000.00
	Less: Salvage Value	$                               -
	Net Value for Depreciation	$                29,000.00
	Usefule life of the Assets	4 years
	Depreciation per year = Value for Depreciation / 4 years =	7,250.00
	Depreciation for the year 2016 =	7,250.00
	Depreciation for the year 2017 =	7,250.00
	Calculation of the opening book value of the year 2018
	Purchase value	29,000.00
	Less: Assets Sold	5,900.00
	Balance =	23,100.00
	Depreciation for the year 2016 =	7,250.00
	Depreciation for the year 2017 =	7,250.00
	Add: Equiplement Purchased	6,500.00
	Total Depreciated value	13,750.00
	Divide By	"/" By
	Remaining useful life	2 years
	Depreciation per year =	6,875.00
	Answer = Option A = None of the answer is correct.