Question

# An asset was purchased for \$120,000 on January 1, 2010 and originally estimated to have a...

An asset was purchased for \$120,000 on January 1, 2010 and originally estimated to have a useful life of 10 years with a residual value of \$10,000. At the beginning of 2012, it was determined that the remaining useful life of the asset was only 4 years with a residual value of \$2,000. Calculate the 2012 depreciation expense using the revised amounts and straight line method.

Please show work to help me understand the material.

Cost of asset= \$120,000

Useful life = 10 years

Residual value - \$10,000

Annual depreciation expense = ( Cost of asset- Residual value)/Useful life

= (120,000-10,000)/10

= \$11,000

Accumulated Depreciation expense for 2 year = Annual depreciation expense x 2

= 11,000 x 2

= \$22,000

Book value of asset after 2 years = Cost of asset - Accumulated Depreciation expense for 2 year

= 120,000-22,000

= \$98,000

Revised residual value = \$2,000

Revised remaining useful life = 4 years

Revised depreciable cost = Book value of asset after 2 years - Revised residual value

= 98,000-2,000

= \$96,000

Revised annual depreciation expense = Revised depreciable cost/ Revised useful life

= 96,000/4

= \$24,000

The 2012 depreciation expense using the revised amounts and straight line method.= \$24,000

Kindly comment if you need further assistance.

Thanks‼!

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