Question

On January 1, 2017, Yeager Company purchased some equipment for $4,700. The estimated life was five years, after which there would be a residual value of $600. On January, 1, 2019, the estimated total economic life from the original purchase date was changed to six years and the estimated residual value was increased by $100. Assuming straight line depreciation method is used by the company, what is the amount of depreciation expense for the year 2019

Answer 1

$575

Step-by-step explanation:

Straight line method charges a fixed amount of depreciation using the formula :

Depreciation expense = (Cost - Residual Value) ÷ Useful Life

2017

Deprecation expense = $820

2018

Deprecation expense = $820

2019

Calculate depreciable amount :

New depreciable amount = Previous Depreciable Amount - Accumulated depreciation - Increase in Residual amount

= $4,700 - $600 - $1,640 - $100

= $2,300

Determine the New useful life :

Since 2 years have already expired, the new useful life out of the revised 6 years is 4.

Depreciation Expense calculation :

Depreciation Expense = Depreciable Amount ÷ Useful Life

= $2,300 ÷ 4

= $575

Conclusion :

The amount of depreciation expense for the year 2019 is $575