Question

An asset was purchased for $147,000.00 on January 1, Year 1 and originally estimated to have a useful life of 8 years with a residual value of $8,500.00. At the beginning of the third year, it was determined that the remaining useful life of the asset was only 4 years with a residual value of $3,000.00. Calculate the third-year depreciation expense using the revised amounts and straight line method.

Answer 1

Answer: $‭27,343.75‬

Explanation:

The original yearly depreciation was ;

= (147,000 - 8,500) / 8

= $‭17,312.5‬0

Value at beginning of Year 3;

= Cost - Accumulated depreciation

= 147,000 - (‭17,312.5‬0 * 2)

= $‭112,375‬

Using the new figures, depreciation per year is now;

= (‭112,375‬ - 3,000) / 4

= $‭27,343.75‬