Question

On January 1, 2017, the Morgantown Company ledger shows Equipment $59,000 and Accumulated Depreciation – Equipment $9,600. The depreciation resulted from using the straight-line method with a useful life of 7 years and salvage value of $2,500. On this date, the company concludes that the equipment has a remaining useful life of only 5 years with the same salvage value.

Compute the revised annual depreciation.
Revised annual depreciation $ _____

Answer 1

Revised annual depreciation $9,380

Step-by-step explanation:

Equipment $59,000

Accumulated Depreciation – Equipment $9,600

Useful life of 7 years

Salvage value of $2,500

Annual Depreciation updated

$59,000 - $9,600 - $2,500 = $,9380

To find the revised annual depreciation we have to deduct of the total equipment the accumulated depreciation Year to Date.

$59,000 - $9,600 = $49,400

At this value we have to substract the Salvage Value of the equipment,

$49,400 - $2,500 = $46,900

So, the revised annual depreciation it's $ $46,900 / 5 Years = $9,380