A company purchased equipment at the beginning of 2021 for $500,000. The equipment is depreciated on...

A company purchased equipment at the beginning of 2021 for $500,000. The equipment is depreciated on a straight-line basis with an estimated useful life of nine years and a $50,000 residual value. At the beginning of 2024, the company revised the equipment’s useful life to a total of seven years (four more years) because of changing customer demand. The company also revised the expected residual value to $30,000. What depreciation expense would the company record for the year 2024 on this equipment? Multiple Choice $80,000. $87,500. $50,000. $75,000.

Solutions

Expert Solution

Correct answer--------$80,000

Working

Straight line Method For year 2021 to 2023
A	Cost	$ 500,000
B	Residual Value	$ 50,000
C=A - B	Depreciable base	$ 450,000
D	Life [in years left ]	9
E=C/D	Annual SLM depreciation	$ 50,000

Depreciation schedule-Straight line method
Year	Book Value	Depreciation expense	Accumulated Depreciation	Ending Book Value
2021	$ 500,000	$ 50,000	$ 50,000	$ 450,000
2022	$ 450,000	$ 50,000	$ 100,000	$ 400,000
2023	$ 400,000	$ 50,000	$ 150,000	$ 350,000

Straight line Method -For 2024
A	Carrying value at 2024 beginning	$ 350,000
B	Residual Value	$ 30,000
C=A - B	Depreciable base	$ 320,000
D	Life [in years left ]	4
E=C/D	Annual SLM depreciation	$ 80,000

ekkarill92 answered 1 month ago

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