Question

A company used straight-line depreciation for equipment that cost $12,000, had a salvage value of $2,000, and a 5-year useful life. At the beginning of year 4 of its useful life, the estimate of the salvage value was reduced to $1,200 and its total useful life was increased to 6 years. The amount of depreciation that will be recorded during each of the remaining years of its useful life is:

Answer 1

The amount of depreciation that will be recorded during each of the remaining years of its useful life is $2,000 for the first three years, and $1,800 for the remaining years.

Step-by-step explanation:

To calculate the amount of depreciation that will be recorded during each of the remaining years of the equipment's useful life, we need to calculate the annual depreciation expense for each year.

The straight-line depreciation method allocates an equal amount of depreciation expense for each year over the useful life of the equipment. To calculate the annual depreciation expense, subtract the salvage value from the initial cost and divide it by the useful life in years.

For the first three years, the annual depreciation expense is ($12,000 - $2,000)/5 = $2,000. For the remaining years, after adjusting the salvage value to $1,200 and increasing the useful life to 6 years, the annual depreciation expense is ($12,000 - $1,200)/6 = $1,800.

Answer 2

depreciation for remaining life is $1600

Step-by-step explanation:

For the first 3 years the - value of assets = $12,000

useful life = 5 years

salvage value = $2000

DEPRECIATION FORMULA =

\frac{VALUE \: OF \: ASSETS \: - SALVAGE \: VALUE}{USEFUL \: LIFE \: YEARS}

= $12,000 - $2,000 / 5

= $2,000

So for first 3 years depreciation = $2000 x 3 = $6000

For remaining 2 years - value of assets = $ 6000 ( $12,000 - $6,000 )

useful life year = 3 years ( useful year increased )

salvage value = $1200

DEPRECIATION FORMULA =

\frac{VALUE \: OF \: ASSETS \: - SALVAGE \: VALUE}{USEFUL \: LIFE \: YEARS}

= $ 6000 - $ 1200 / 3

= $4800 / 3

= $1600