Question

2-Eckland Manufacturing Co. purchased equipment on January 1, 2019, at a cost of $90,000. Straight-line depreciation for 2019 and 2020 was based on an estimated eight-year life and $2,000 estimated residual value. In 2021, Eckland revised its estimate and now believes the equipment will have a total service life of only six years, while the residual value remains the same.

Required:
Compute depreciation for 2021 and 2022.

Answer 1

Answer :

Step 1:

Depreciation for 2019 and 2020 = (cost of asset -salvage value )/original useful life:

= (90,000 - 2,000 ) / 8

= 88,000 / 8

= $ 11,000 per year

so for 2 years ,accumulated dep = 11,000 *2 = 22,000

Book value at beginning of 2021 = 90,000 -22,000 = 68,000

Step 2:

Revised remaining useful life = 6 - 2 expired = 4 years

Revised depreciation = (Book value -salvage )/remaining useful life

= (68,000 - 2000)/ 4

= 66,000 /4

= 16,500 per year

Therefore ,

Depreciation for :-

2021 = 16,500

2022 = 16,500