Question

Fellingham Corporation purchased equipment on January 1, 2019, for $400,000. The company estimated the equipment would have a useful life of 10 years with a $40,000 residual value. Fellingham uses the straight-line depreciation method. Early in 2021, Fellingham reassessed the equipment's condition and determined that it has a remaining useful life of four years and that it would have no salvage value. Which of the following values is the closest to what Fellingham reports as depreciation on this equipment for 2021?

a. $50,240.
b. $36,960.
c. $52,440.
d. $55,440.

Answer 1

Answer not in the given option, please recheck for error.

depreciation in 2021 would be= $82,000

Step-by-step explanation:

Depreciation incurrred in 2019:

Using straight line depreciation = original cost - salvage value / useful life

=(400,000-40,000)/10

=$36,000

The depreciation from January 1, 2019 to December 31st 2020 = 2 years

therefore depreciation for the two years = $36,000 x 2 = $72,000

Book value recorded early 2021= Original cost - the A ccumulated Deprecaition

= 400,000- 72,000= $328,000

But Remaining useful life =4 years with no salvge value

Therefore depreciation in 2021 would be = Cost - salvage value / useful life

($328,000 - 0)/4

= $82,000