Question

P purchased a machine on January 1, 2018 for $53656 At the time of purchase, the machine was expected to have a useful life of 16 years and a residual value of $4292 P uses straight-line depreciation At the beginning of 2026, P estimated the machine had a remaining useful life of 11 years with no residual value. Determine the following amounts

1. The depreciation expense for the year ending December 31, 2018:
2. The carrying value of the machine on January 1, 2026:
3. The depreciation expense for the year ending December 31, 2026:
4. The carrying value of the machine on December 31, 2026:

Answer 1

Jan' 18 to Dec' 25 estimated annual depreciation = 3085, Jan'26 onwards estimated annual depreciation = 4878

1) 3085, 2) 28976, 3) 4878, 4) 24098

Step-by-step explanation:

Annual Depreciation = (Cost - Scrap Value) / Useful Years

On Jan 2018, Estimated Annual Depreciation = (53656 - 4292) / 16 = 3085

On Jan 2026, Estimated Annual Depreciation = (53656 - 0) / 11 = 4878

1. The depreciation expense for the year ending December 31, 2018 = 3085

2. The carrying value of the machine on January 1, 2026 = Cost - Dep 8 years (2018 - 2025) = 53656 - (3085) 8 = 53656 - 24680 = 28976

3. The depreciation expense for the year ending December 31, 2026 = 4878

4. The carrying value of the machine on December 31, 2026 = Carrying capacity Jan'2026 - depreciation for year ending Dec'2026 = 28976 - 4878 = 24098