Question

My Blackboard Content - Bl Course Home adents - Westche VHL Central Course Dashb Chapter 7 Assignment x @ https://newconnect.mheducation.com/flow/connect.html ect then , and drag to the Favorites Bar folder. Or import from another browser, Import favorites Assignment Saved Help Save The Donut Stop acquired equipment for $21,000. The company uses straight line depreciation and estimates a residual value of $2600 and a four-year service life. At the end of the second year, the company estimates that the equipment will be useful for four additional years, for a total service life of six years rather than the original four. At the same time, the company also changed the estimated residual value to $1,500 from the original estimate of $2,600. Required: Calculate how much The Donut Stop should record each year for depreciation in years 3 to 6. $ 21,000 Cost of the equipment Less: Accumulated Depreciation (Years 1 and 2) Book value, end of year 2 Less: New residual value New depreciable cost Remaining service life Annual depreciation in years 3 to 6

Answer 1

Cost of equipment	$        21,000
Less: Accumulated depreciation (Year 1 and 2)	$          9,200
Book value, end of year 2	$        11,800
Less: Net residual value	$          1,500
New depreicable cost	$        10,300
Remaining service life	4
Annual depreciation in year 3 to 6	$          2,575

Depreication for year 1 and 2

Cost of equipment	$        21,000
Less: Residual value	$          2,600
Depreciable amount	$        18,400
Useful life	4 years
Depreication (18400/4)	$          4,600
For year 1 and 2 (4600*2)	$          9,200