Question

Cathrine Corporation acquired a machine for $26,000, and has recorded depreciation for 3 yearsusing the straight-line method over a 6-year life and $2,000 residual value. At the start of the fourth year of use, Denver revised the estimated useful life to a total of 10 years. Estimated residual value declined to $0. 26000-2000=24000/6=4000*3=12000-26000=14000-0=14000/7=2000How much depreciation should Denver record in each of the asset’s last 7 years (that is, year 4 through year 10), following the revision?

Answer 1

$2,000

Step-by-step explanation:

Net book value at the end of the 3rd year=26,000-((26,000-2,000/6)*3)

=$14,000

Since the useful life of machine is now revised from the 6 years to 10 years, therefore the total remaining useful life of machine is now 7 years instead of 3 years and accordingly the depreciation from year 4 to year 10 shall be calculated as follows:

Depreciation per year from year 4 to year 10=*14,000-0)/7=$2,000