Question

On January 1, the Matthews Band pays $67,200 for sound equipment. The band estimates it will use this equipment for four years and after four years it can sell the equipment for $1,000. Matthews Band uses straight-line depreciation but realizes at the start of the second year that this equipment will last only a total of three years. The salvage value is not changed. Compute the revised depreciation for both the second and third years. Book value at point of revision Remaining depreciable cost Depreciation per year for years 2 and 3

Answer 1

Answers

A	Cost	$67,200
B	Salvage value	$1,000
C = A - B	Depreciable cost	$66,200
D	Useful life	4
E = C/D	Year 1 Depreciation	$16,550
F = A - E	Book Value at point of revision	$50,650	Answer
G = B	Salvage value	$1,000
H = F - G	Remaining depreciable cost	$49,650	Answer
I = 3 years - 1 year	Remaining life	2
J = H/I	Depreciation per year for Year 2 and year 3	$24,825	Answer