Question

A company used straight-line depreciation for an item of equipment that cost $16,950, had a salvage value of $4,200 and a six-year useful life. after depreciating the asset for three complete years, the salvage value was reduced to $1,695 but its total useful life remained the same. determine the amount of depreciation to be charged against the equipment during each of the remaining years of its useful life:

Answer 1

Depreciation=(equipment cost-salvage value)/useful life

Depreciation=(16,950−4,200)÷6
=2,125 per year

Book value after 3 years
=16,950−2,125×3
=10,575

Now find the amount of depreciation to be charged against the equipment during each of the remaining years of its useful life
Depreciation=(equipment cost-salvage value)/useful life

Depreciation=(10,575−1,695)÷3
=2,960

Answer 2

$2,960

Step-by-step explanation:

Cost = $16,950

Salvage value =$4,200

Useful life = 6 years

Annual depreciation = ($16,950 - $4,200)/6

= $12,750 /6

= $2,125

Revised salvage value after 3 years = $1,695

Carrying amount of the asset after 3 years = $16,950 - (3 × $2,125)

= $16,950 - $6,375

= $10,575

Charge for the year after revision

= ($10,575 - $1,695)/3

= $8,880/3

= $2,960

Amount of depreciation to be charged against the equipment during each of the remaining years of its useful life is $2,960