Question

Revision of Depreciation People's Clinic purchased a special machine for use in its laboratory on January 2, 2016. The machine cost $100,000 and was expected to last 10 years. Its salvage value was estimated to be $6,000. By early 2018, it was evident that the machine will be useful for a total of only seven years. The salvage value after seven years was estimated to be 57.500. People's Clinic uses straight- line depreciation. Compute the proper depreciation expense on the machine for 2018 Depreciation Expense for 2018$ Check

Answer 1

Depreciation Expenses for 2018 S 14,740 Working Notes: Cost of Special machine = $100,000 Useful Life = 10 Years Salvage Value = $6,000 Depreciation under Straight Line Method = (Cost of Machine -Salvage Value)/Useful Life = ($100,000-$6.000)/10 = $9,400 Accumulated depreciation beginning of 2018 = $9,400*2 = $18.800 Book value at the beginning of 2018 = $100,000-$18,800 = $81,200 Revised Useful Life of machine = 7 Years in total useful life Balance useful Life of machine = 7-2 = 5 Years Revised salvage value = $7,500 Revised Depreciation for 2018 = ($81,200-$7,500)/5 = $14.740