Question

12. A company used straight-line depreciation for an item of equipment that cost $19,000, had a salvage value of $2,000, and had a 8-year useful life. After depreciating the asset for 2 complete years, the salvage value was reduced to $1,400 and its total useful life was increased from 8 years to 10 years. Determine the amount of depreciation to be charged against the machine during each of the remaining years of its useful life (round depreciation per year to a whole number):

A 1730

B 4250

C 1758

D 2125

E 1669

Answer 1

Carrying Value -Cost- Accumulated Depreciation Annual Depreciation under Straight Line Method (Cost - Salvage Value) Useful Life Annual Depreciation Before Revision (S19000 S2000)/8- $2,125 Carrying Value after 2 Years (S19000-(2x$2125)- $14,750 Calculation of Revised Depreciation Revised useful life 10 Years Revised Residual Value $1400 Revised Depreciation = (Carying Value-Revised Salvage Value) (Revised Useful Life-Used Life) - ($14,750 - $1,400)/(10-2) 1,668.75 So Option E is Correct Answer