Question

Bonita Company purchased a computer for $8,720 on January 1, 2019. Straight-line depreciation is used, based on a 5-year life and a $1,090 salvage value. In 2021, the estimates are revised. Bonita now feels the computer will be used until December 31, 2022, when it can be sold for $545. Compute the 2021 depreciation. (Round answer to 0 decimal places, e.g. 45,892.) Depreciation expense, 2021

Answer 1

$2,562

Step-by-step explanation:

For computing the 2021 depreciation, first we have compute the ending book value for 2019 and 2020 which is shown below:

The formula to compute the depreciation expense is shown below:

= (Original cost - residual value) ÷ (useful life)

For year 2019

= ($8,720 - $1,090) ÷ (5 years)

= ($7,630) ÷ (5 years)

= $1,526

For two years, the depreciation would be

= $1,526 × 2 years

= $3,050

In this method, the depreciation is same for all the remaining useful life

Now the book value would be

= Acquired value of an asset - accumulated depreciation

= $8,720 - $3,050

= $5,668

Now the depreciation expense for 2021 would be

= (Ending book value - residual value) ÷ (remaining life)

= ($5,668 - $545) ÷ (2 years)

= ($5,123) ÷ (2 years)

= $2,562