Question

Equipment was acquired on January 1, 2014, at a cost of $170,000. The equipment was originally estimated to have a salvage value of $10,000 and an estimated life of 10 years. Depreciation has been recorded through December 31, 2016, using the straight-line method. On January 1, 2017, the estimated salvage value was revised to $16,000 and the useful life was revised to a total of 8 years.
Determine the depreciation expense for 2017.

Answer 1

• Answer: Depreciation expense for 2017 will be $ 21,200
• The working for same is given below:

A	Original Cost	$        170,000.00
B	Original Salvage Value	$           10,000.00
C = A - B	Original Depreciable base	$        160,000.00
D	Original estimated life	10
E = C/D	Original annual depreciation	$           16,000.00
	2014's depreciation	$           16,000.00
	2015's depreciation	$           16,000.00
	2016's depreciation	$           16,000.00
F = E x 3 years	Total Depreciation before change in estimates	$           48,000.00
G = A - F	Book Value at the time of change of estimates	$        122,000.00
H	New Salvage Value	$           16,000.00
I = G - H	New Depreciable base	$        106,000.00
J = 8 years - 3 years passed	New remaining useful life	5
K = I/J	New annual depreciation (Dep for 2017)	$           21,200.00