Question

BE11-7.  

(LO 2) Holt Company purchased a computer for $8,000 on January 1, 2016. Straight-line depreciation is used, based on a 5-year life and a $1,000 salvage value. In 2018, the estimates are revised. Holt now feels the computer will be used until December 31, 2019, when it can be sold for $500. Compute the 2018 depreciation.

Answer 1

		Original Cost	8000
		Less: Salvage Value	1000
		Net Depreciable Value	7000
		Life	5
		Depreciation PA	1400
		Original Cost	Depreciation PA	Accumulated Dep	Book Value
	2016	8000	1400	1400	6600
	2017	8000	1400	2800	5200
		Revision in Estimate:
	2018	Balance Life	3	Original Estimate
		Revised Life	2
		Depreciation Exp=(Cost-Revised Residual Value-Accumulated Depreciation)/Revised Remaining Useful Life
		Depreciation Exp=(8000-500-2800)/2
		Depreciation Exp=(4700)/2
	2018	Depreciation Exp=2350