Question

On July 1, 2019, Crane Company purchased new equipment for $75,000. Its estimated useful life was 5 years with a $8,000 salvage value. On December 31, 2022, the company estimated that the equipment’s remaining useful life was 10 years, with a revised salvage value of $5,000.

X Your answer is incorrect. Compute the revised annual depreciation on December 31, 2022. Revised annual depreciation $ 2310

Answer 1

Revised Annual depreciation S 3,650 Working Notes: Equipment Cost = $75,000 salvage value = $8,000 Useful life = 5 Years Depreciation = (Cost of Equipment- salvage value)/useful life = ($75,000-$8.000)/5 = $13,400 Accumulated Depreciation as on December 31, 2022 = 2.5 Years *$13,400 = $33.500 Book value at the end of December 31, 2022 = $75,000-$33,500 = $41,500 Revised Useful life = 10 years Revised salvage value = $5,000 Revised annual Depreciation = ($41,500-$5,000/10 = $3,650