Final answer:
After revising estimates, the depreciation of the Vaughn Company's computer for 2021 is calculated based on the remaining book value at the beginning of 2021 and the new salvage value, resulting in a depreciation amount of $2,702.50 for the year.
Step-by-step explanation:
The Vaughn Company needs to compute the depreciation for a computer for the year 2021 after revising its estimates. The original purchase price was $9,200 with a straight-line depreciation over 5 years and an initial salvage value of $1,150. Initially, two years of depreciation would have been recognized (for the years 2019 and 2020).
To calculate the total depreciation before the revision, we subtract the salvage value from the cost and divide by the useful life:
Total Depreciation per Year = (Cost - Salvage Value) / Useful Life = ($9,200 - $1,150) / 5 = $1,610 per year.
Depreciation for two years = 2 * $1,610 = $3,220
Book Value at the beginning of 2021 = Cost - Accumulated Depreciation = $9,200 - $3,220 = $5,980.
The revised estimates now indicate that the computer will be used until December 31, 2022, with a new salvage value of $575. Thus, we have two more years to depreciate the remaining book value:
Revised Total Depreciation per Year = (Book Value at Beginning of 2021 - Revised Salvage Value) / Remaining Life = ($5,980 - $575) / 2 = $2,702.5 per year.
Therefore, the depreciation for 2021 after the revision will be $2,702.50.