Question

purchased a truck at a cost of $67,200. It has an estimated useful life of five years and estimated residual value of $6,200. At the beginning of year three, Ripple decided that the total useful life would be four years, rather than five years. There was no change in the estimated residual value. What is the amount of depreciation that Ripple should record for year 3 under the straight-line depreciation method

Answer 1

Ripple Corporation

The amount of depreciation that Ripple should record for year 3 under the straight-line depreciation method is:

= $18,300.

Step-by-step explanation:

a) Data and Calculations:

Cost of truck = $67,200

Estimated useful life = 5 years

Estimated residual value = $6,200

Depreciable amount = $61,000 ($67,200 - $6,700)

Annual depreciation expense = $12,200 ($61,000/5)

Accumulated depreciation after two years = $24,400

Net book value = $42,800 ($67,200 - $24,400)

Revised Estimates:

Re-estimated Useful life = 4 years

Remaining useful life = 2 years

Salvage value = unchanged

Depreciable amount = $36,600 ($42,800 - $6,700)

Annual depreciation expense = $18,300 ($36,600/2)