Question

The Charlotte Company acquired a machine on July 1, 2015 for $250,000. They started using the machine on that date. They assigned a useful life of eight (8) years and a salvage value of $10,000. They use straight-line deprecation. On January 1, 2018, they spent $8,875 on the machine, increasing its productivity by 4%. On this date, they also increased the salvage value by $2.000. Calculate the depreciation expense on the machine for the year ended December 31, 2018.

Answer 1

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Machine Acquired Date Machine price useful life Salvage Value 01-Jul-15 250000 8 Year 10000 (250000-10000)/8 Yearly Depreciation based on above information 30000 Depreciation till 31 Dec 2017 would be for 2.5 year from the date of purchase of assets So total depreciatio would be 30000*2.5 i.e 75000 Written down value as on 1 Jan 18 is 250000 - 75000 i.e 175000 On 1 Jan 2018, 8875 was spent which increase it productivity, This will be added to the written down value calculated above i.e 175000 + 8875 ie 183875 Revised salvage value (10000+2000) 12000 Revised Depreciation for 31 Dec2018 (183875-12000)/(8-2.5) 31250