Question

Practice Do It! Review 01

Monty Corp. purchased a piece of equipment for $75,300. It estimated an 8-year life and a $1,200 salvage value. At the end of year four (before the depreciation adjustment), it estimated the new total life to be 10 years and the new salvage value to be $23,011.

Compute the revised annual depreciation. (Round answer to 0 decimal places, e.g. 5,275.)

Revised annual depreciation

$

Answer 1

Depreciation under straight line method = (Purchase price-Salvage value)/useful life
Depreciation per year for first 3 years = ($75300-$1200)/8
	= $74100/8
	= $9262.5 per year
Written down value after 3 years = $75300-($9262.5*3)
	= $75300-$27787.5
	= $47512.5
Depreciation per year from year 4 = ($47512.5-$23011)/7years
	= $3500 per year
Revised depreciation = $3500