Question

On July 1, 2022, Crane Company purchased new equipment for $83,200. Its estimated useful life was 7 years with a $10,400 salvage value. On January 1, 2025, the company estimated that the equipment's remaining useful life was 10 years, with a revised salvage value of $5,200.

Compute the revised annual depreciation on December 31, 2025.

Answer 1

The revised annual depreciation on December 31, 2025 can be calculated using the straight-line depreciation method.

Step 1: Determine the initial cost of the equipment ($83,200) and subtract the salvage value ($10,400) to get the depreciable cost: $83,200 - $10,400 = $72,800.

Step 2: Determine the remaining useful life of the equipment from January 1, 2025, to December 31, 2025. The remaining useful life is 10 years.

Step 3: Calculate the revised annual depreciation by dividing the depreciable cost ($72,800) by the remaining useful life (10 years): $72,800 ÷ 10 = $7,280.

Therefore, the revised annual depreciation on December 31, 2025 is $7,280.

In summary, the revised annual depreciation on December 31, 2025 for the equipment is $7,280. This calculation is based on the straight-line depreciation method, which evenly allocates the depreciable cost over the remaining useful life of the equipment.