Question

Apex Fitness Club uses straight-line depreciation for a machine costing $23,860, with an estimated four-year life and a $2,400 salvage value. At the beginning of the third year, Apex determines that the machine has three more years of remaining useful life, after which it will have an estimated $2,000 salvage value. Required: 1. Compute the machine's book value at the end of its second year. 2. Compute the amount of depreciation for each of the final three years given the revised estimates. Complete this question by entering your answers in the tabs below. Required 1 Required 2 Compute the machine's book value at the end of its second year. Book Value at the End of Year 2: Cost Accumulated depreciation 2 years Book value at point of revision $ Required 1 Required 2

Answer 1

1. Depreciation per year according to starting estimates

= (Cost - salvage value)/ life of asset

= ($23860 - $2400)/4

= $5365

Depreciation for 2 years = $5365*2 = $10730

Particulars	Amount
Cost	$23860
Less accumulated depreciation	$10730
Book value at the end of 2nd year	$13130

2.

Revised depreciation

Book value at the point of revision	$13130
Revised salvage value	$2000
Remaining depreciable cost	$11130
Years of life remaining	3 years
Depreciation revised annual	$3710

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