Question

Equipment with a cost of $79,460.00, an estimated residual value of $4,376.00, and an estimated life of 15 years was depreciated by the straight-line method for 4 years. Due to obsolescence, it was determined that the remaining useful life should be shortened by 3 years and the residual value changed to zero. The depreciation expense for the current and future years is

Select the correct answer.

$3,962.51

$7,429.70

$8,491.09

$20,022.40

Answer 1

Annual depreciation before change ($79,460-$4,376)/15 Annual depreciation before change $75,084/15 Annual depreciation before change $5005.6 Depreciation for 4 years $5005.6*4 = $20,022.4 Book value after 4 years $79,460-$20,222.4 Book value after 4 years $59,437.6 Remaining useful life = (15-4)-3 Remaining useful life 11-3 Remaining useful life 8 years Depreciation expense for current and future years ($59,437.6-$0)/8 Depreciation expense for current and future years $7,429.70 Hence, the correct option is $7,429.70