Question

Whispering Winds Corp. purchased a piece of equipment for $ 70,100. It estimated an  8-year life and a $ 2,900 salvage value. At the end of year four (before the depreciation adjustment), it estimated the new total life to be  10 years and the new salvage value to be $ 8,500.

Compute the revised depreciation. (Round answer to 0 decimal places, e.g. 5,275.)

Revised annual depreciation $____________

Answer 1

• Working

A	Original Cost	$           70,100.00
B	Salvage Value	$             2,900.00
C = A - B	Original Depreciable base	$           67,200.00
D	Estimated life	8
E = C/D	Annual Depreciation	$             8,400.00
F = E x 3 years	3 years' depreciation = Accumulated Depreciation	$           25,200.00
G = A - F	Book Value at the time of revision	$           44,900.00
H	New Salvage Value	$             8,500.00
I = G - H	New Depreciable base	$           36,400.00
J	New estimated life	10
K	Life expired	3
L = J - K	Remaining Life	7
M = I/L	Revised Annual Depreciation	$             5,200.00 = Answer

• Answer = $ 5200