Question

On January 1, 2022, the Hermann Company ledger shows Equipment $36,000 and Accumulated Depreciation $13,600. The depreciation resulted from using the straight-line method with a useful life of 10 years and a salvage value of $2,000. On this date, the company concludes that the equipment has a remaining useful life of only 2 years with the same salvage value. Compute the revised annual depreciation. The revised annual depreciation $enter the revised annual depreciation in dollars

Answer 1

Answer:

Annual depreciation= $10,200

Explanation:

Giving the following information:

Purchase price= $36,000

Accumulated depreciation= $13,600

Salvage value= $2,000

Useful life: 2 years

To calculate the revised annual depreciation, we need to use the following formula:

Annual depreciation= [(book value - salvage value)/estimated life (years)]

Book value= purchase price - accumulated depreciation

Book value= 36,000 - 13,600= $22,400

Annual depreciation= (22,400 - 2,000) / 2

Annual depreciation= $10,200