Question

oncept Overview Videos Saved Help Save & Exit Submit Required information Revised remaining useful life 4 years 1305 1:25 / 2:13 1x CO Knowledge Check 01 A company used straight-line depreciation for equipment that cost $12,000, had a salvage value of $2,000, and a 5- year useful life. At the beginning of year 4 of its useful life, the estimate of the salvage value was reduced to $1,200 and its total useful life was increased to 6 years. The amount of depreciation that will be recorded during each of the remaining years of its useful life is: $2,000 $6,000 $1,600 $2,400 < Prev CD 7 of 22 Next >

how do you cakcukate it

Answer 1

Cost of equipment in the begining = $. 12000

Salvage value = $. 2000

Balance amount to be covered thru depriciation = $12000-$2000= $10000

According to Straight line method the Depriciation to be Charged per year=

Total amount to be covered = $10000

No. of years = 5 years(life period of the equipment)

Deprciation to be charged per year =$10000/5 = $2000

After 3 years the depriciation accumulated = 2000+2000+2000 = $ 6000

Now the changed expectations are:

Salvage value expected = $1200

Balance in the equipment account = 12000-$6000 = $6000

The revised remaining life period of equipment = 3 years

The value of Depriciation per year as per straight line method =

Total balance to be covered in 3 years period = $6000

Salvage value = $ 1200

Total amount of depriciation to be covered in 3years period excluding salvage value= $6000-$1200=$4800

Depriciation to be charged per annum = $4800/3=$1600

Thus required answer will be $1600 ie third one in the options provided