Question

please explain why book value is 70000 and req 2 ans is 56000

Assume that XYZ Catering Services paid $112 000 for equipment with a 16 year de andere expected residual va A more years sing the equipment for six years, the company determines that we will remain for only ve Read the requirements Requirement 1. Record depreciation expense on the equipment for year 7 by the straight line method First select the form to calculate the company's revised depreciation expense on the equipment for year? Then enter the amounts and calculate the depreciation for year? En forms with a roval Revised Record the depreciation on the equipment for year Record debts first the credits Soled the explanation on the l ine of the journal entry table Accounts and Explanation Depenen Acolated Depreciation Equipment

Answer 1

Depreciation expense using straight line method= (Original cost-Residual value)/Expected life remaining

= ($112000-0)/16= $7000 per year

As after determine the company determines the asset will remain useful only for 5 years. So, company has to calculate revised depreciation for this

Accumulated depreciation at the end of the year 6= $7000*6= $42000

Book value at the end of the year 6= Original costs-Accumulated depreciation at the end of the year 6

= $112000-42000= $70000

Now, calculation of revised depreciation expense

(	Book value	-	Residual value	)	/	Revised useful life remaining	=	Revised depreciation
(	$70000	-	0	)	/	5	=	$14000

Date	Account titles and explanation	Debit	Credit
	Depreciation expense- Equipment	$14000
	Accumulated depreciation- Equipment		$14000
	(To record depreciation expense)

Accumulated depreciation at the end of Year 7= Accumulated depreciation at the end of the six year+Depreciation expense for Year 7

= $42000+14000= $56000