Question

A company used straight-line depreciation for equipment that cost $12,000, had a salvage value of $2,000, and a 5-year useful life. At the beginning of year 4 of its useful life, the estimate of the salvage value was reduced to $1,200 and its total useful life was increased to 6 years. The amount of depreciation that will be recorded during each of the remaining years of its useful life is _____.

Answer 1

$1600

Step-by-step explanation:

The cost of the equipment is $12000

Residual value is $2000

Useful life is five years

Depreciation per year = Asset value - residual value / useful life

= $12000- $2000/ 5

=$2000

Book value at the beginning of year four( End of three years) will be

=Cost of equipment - accumulated depreciation

= $12,000 - ($2000 x 3)

=$12,000 - $6000

=$6,000

With a new residual value of $1200 and a useful life is now 6 years, depreciation amount in each of the subsequent years will be.

the machine will be useful for 3 more years

= $6000- $1200/3

=$4,800/3

=$1600