Question

Windsor Company purchased a computer for $8,640 on January 1, 2019. Straight-line depreciation is used, based on a 5-year life and a $1,080 salvage value. On January 1, 2021, the estimates are revised. Windsor now feels the computer will be used until December 31, 2022, when it can be sold for $540. Compute the 2021 depreciation.

Answer 1

$2,538

Step-by-step explanation:

For computing the 2021 depreciation, first we have to determine the depreciation expense for 2019 which is shown below:

= (Original cost - salvage value) ÷ useful life

= ($8,640 - $1,080) ÷ 5 years

= $7,560 ÷ 5 years

= $1,512

Now the accumulated depreciation would be

= $1,512 × 2 years

= $3,024

Now the book value would be

= Original cost - accumulated depreciation

= $8,640 - $3,024

= $5,616

Now the depreciation expense for 2021 would be

= (Ending Book value - salvage value) ÷ remaining life

= ($5,616 - $540) ÷ 2 years

= $5,076 ÷ 2 years

= $2,538