Question

Fishing Guides Co. used straight-line depreciation for a boat that cost $13,550, had a salvage value of $2,600 and a six-year useful life. After depreciating the asset for three complete years, the salvage value was reduced to $1,355 but its total useful life remained the same. Determine the amount of depreciation to be charged against the equipment during each of the remaining years of its useful life:

Answer 1

Annual depreciation for first three years = ($13,550 - $2,600)/6 Annual depreciation for first three years = $10,950/6 Annual depreciation for first three years = $1,825 Accumulated depreciation for three years = $1,825*3 Accumulated depreciation for three years = $5,475 Book value after three years = $13,550 - $5,475 Book value after three years = $8,075 Remaining useful life = 6 years - 3 Years Remaining useful life = 3 years Revised salvage value = $1,355 Amount of depreciation for each remaining year of its useful life = ($8,075 - $1,355)/3 Amount of depreciation for each remaining year of its useful life = $6,720/3 Amount of depreciation for each remaining year of its useful life = $2,240