Question

Sevca Apex Fitness Club uses straight-line depreciation for a machine costing $23.860, with an estimated four-year life and a $2,400 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 $2,000 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 machine's book value at the end of its second year. Book Value at the End of Year 2: Cost Accumulated depreciation 2 years Book value at point of revision Roquhed 1 Required 2 >

Answer 1

1)

book value at the end of year 2:
cost	$23860
accumulated depreciation 2 years	$10730
book value at point of revision	$13130

depreciation under straight line method=(cost-salvage value)/estimated life

given

cost=$23860

salvage value=$2400

estimated life is 4 years

depreciation under straight line method=($23860-$2400)/4=$5365

acummulated depreciation for 2 years=$5365*2=$10730

2) $3710

depreciation charge for each of the final thre years after revised estimates=(book value at point of revision - revised salvage value)/revised estimated life

book value at point of revision=$13130

revised salvage value=$2000

revised estimated life remaining is 3 years

depreciation charge for each of the final thre years after revised estimates=($13130-$2000)/3=$3710