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George & Co. purchased a machine on January 10, 2018. The total cost of the purchase...

George & Co. purchased a machine on January 10, 2018. The total cost of the purchase was $116,000. The machine has an estimated salvage value of $14,000 and an estimated useful life of 6 years. In May of 2018, the company spent $4,000 to overhaul the machine’s engine; this changed the estimate of the machine’s total useful life to 8 years. Depreciation for 2018 was recorded before the overhaul. Show calculations for the annual straight-line depreciation amounts for this asset for 2018 through 2021.

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Answer #1

Depreciation for 2018

Cost of Machine = $116,000

Useful life = 6years

Salvage value = $14,000

SLM Depreciation = (116,000-14000)/6years

SLM deprecaition = $17,000 per year

Depreciation for 2019

Written down value

=116,000-17,000

Written down value = $99,000

Depreciation after overhaul

Written down value = $99,000

Add : Overhaul cost = $4000

Total = $103,000

Depreciation = ($103,000-$14,000) / (8years - 1year)

Depreciation = $12,714

SLM Depreciation for 2019 = $12,714

Depreciation for 2020

Written down value = 103,000 - 12,714

=90,286

SLM Depreciation for 2020 = $12,714

Depreciation for 2021

Written down value = 90,286-12,714

=77,571

SLM Depreciation for 2020 = $12,714

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