Question

Machinery purchased for $69,600 by Tamarisk Co. in 2016 was originally estimated to have a life of 8 years with a salvage value of $4,640 at the end of that time. Depreciation has been entered for 5 years on this basis. In 2021, it is determined that the total estimated life should be 10 years with a salvage value of $5,220 at the end of that time. Assume straight-line depreciation.

Answer 1

data			correction
purchased machinary	$      69,600
est. life	8	years	10	years
est. salvage value	$        4,640		$       5,220
depreciation	5	years
calculation of book value after 5 years
equiptment cost	$      69,600
salvage value	$        4,640
depreciable base	$      64,960
useful life (original)	8
Annual depreciation	$        8,120	$     40,600
balance sheet
equiptment	$      69,600
accum. Depreciation	$      40,600
net book value	$      29,000
calculation of depreciation expense
net book value	$      29,000
salvage value (new)	$        5,220
Depreciable base	$      23,780
useful life (revised remaining)	8
annual depreciation	2,972.50
equiptment cost	$      69,600
accum depr	$      40,600
book value in year 2021	$      29,000
revised salvage value	$        5,220
depreciable cost	$      23,780
revised useful life	5
	$        4,756
journal entry
no journal entry
journal entry for 2021
Depreciation expense	4,756.00
Accum. Depreciation		4,756.00