Question

# An asset that cost \$72,000 has a current book value of \$42,000. A revision of the...

1. An asset that cost \$72,000 has a current book value of \$42,000. A revision of the useful life of the asset estimates the asset has a remaining useful life of four years and will have a salvage value of \$12,600. Using the straight-line method, calculate the revised annual depreciation.

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Working Paper (Optional)

Change in depreciation is a change in estimation and not change in accounting policy. So no correction of previous depreciation is required. Only prosepctive change is recorded. Thus the initial cost of \$72,000 is irrelevant. The current book value of \$42,000 is considered as cost.

Book value / Cost = \$42,000

Salvage value = \$12,600

Estimated useful life = 4 years

Revised annual depreciation = (Cost -Slavage value) / Estimated useful life = (\$42,000 - \$12,600) / 4 years = \$7,350

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