Question

Apex Fitness Club uses straight-line depreciation for a machine costing $28,300, with an estimated four-year life and a $3.000 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 $2,550 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 amount of depreciation for each of the final three years given the revised estimates. (Do not round Intermediate calculations. Round your answers to the nearest whole dollar) Revised Depreciation (Years 3-5) Book value at point of revision Revised salvage value Remaining depreciable cost Years of life remaining Revised annual depreciation years 3-5 < Required 1

Answer 1

1. Cost of Machine = $ 28,300

Estimated useful life = 4 years

Salvage Value = $ 3,000

Annual Depreciation = (Cost of Machine - Salvage Value) /Estimated useful life

= (28,300 - 3,000) / 4

   = 25,300 / 4

= $ 6,325

Accumulated Depreciation for 2 year  = annual depreciation x 2

= 6,325 x 2

= $ 12,650

Machine book value at the end of Second year = Cost of machine - Accumulated Depreciation

= 28,300 - 12,650

= $ 15,650

2.  

Revised Depreciation (year 3-5)
Book Value at point of revision	15,650
Revised saving value	-2,550
Remaining depreciable cost	13,100
Years of life remaining	3
Revised annual depreciation year 3-5	$ 4,367

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