Question

On July 1, 2019, Cullumber Company purchased new equipment for $80,000. Its estimated useful life was 5 years with a $8,000 salvage value. On December 31, 2022, the company estimated that the equipment’s remaining useful life was 10 years, with a revised salvage value of $5,000.

Calculate the revised annual depreciation

Answer 1

Revised Annual depreciation 3900 Working Notes: Equipment Cost = $80,000 salvage value = $8,000 Useful life = 5 Years Depreciation = (Cost of Equipment- salvage value)/useful life = ($80,000-$8,000)/5 = $14.400 Accumulated Depreciation as on December 31, 2022 = 2.5 Years * $14,400 = $36,000 Book value at the end of December 31, 2022 = $80,000-$36,000 = $44,000 Revised Useful life = 10 years Revised salvage value = $5,000 Revised annual Depreciation = ($44,000-$5,000)/10 = $3,900