Question

On January 1, 2018, Betty DeRose, Inc. purchased equipment for $95,000. The equipment was assigned an estimated life of 15 years and a salvage value of $12,5 00. On January 1, 2021, Betty DeRose decided the life of the equipment should be changed from 15 to 25 years with a salvage value of $5,900 at the end of the 25 year s. Betty DeRose uses the straight-line method to depreciate its assets. Calculate the book value of the equipment at December 31, 2023.

Answer 1

Calculation of book value of equipment at December 31, 2023 | Jan-18 Purchase price of equipment estimated life Salvage Value | $ 95,000 15 years $ 12,500 Depreciation = (Purchase price-Salvage value)/Estimated life =(95000-12500)/15 $ 5,500 Dec-18 Depreciation $ 5,500 Dec-19 Depreciation $ 5,500 Dec-20 Depreciation $ 5,500 S 16,500 on Jan 1,2021 estimated life is changed to 15 to 25 years so no: of years remaining = 22 years (15-3+10) Book value of Equipment at jan1,2021 = (95000-16500) $ 78,500 Salvage value = 5900 Depreciation =(78500-5900)/22 3,300 Dec-21 Depreciation $ 3,300 Dec-22 Depreciation $ 3,300 Dec-23 Depreciation $ 3,300 $ 9,900 Book value of equipment at December 31,2023 = (78500-9900) S 68,600