Question

Bramble Corp. purchased machinery on January 2, 2012, for $900000. The straight-line method is used and useful life is estimated to be 10 years, with a $76000 salvage value. At the beginning of 2018 Bramble spent $191000 to overhaul the machinery. After the overhaul, Bramble estimated that the useful life would be extended 4 years (14 years total), and the salvage value would be $37000. The depreciation expense for 2018 should be:

$82400.

$57450.

$76400.

$69950

Answer 1

• All working forms part of the answer

A	Original Cost	$          900,000.00
B	Original salvage value	$            76,000.00
C = A - B	Original Depreciable base	$          824,000.00
D	Original estimated life	10
E = C/D	Annual Depreciation	$            82,400.00
F = E x 6 years	Total Depreciation from 2012 to 2017	$          494,400.00
G = A - F	Book Value	$          405,600.00
H	Overhaul cost	$          191,000.00
I = G+H	New Book Value	$          596,600.00
J	New Salvage Value	$            37,000.00
K = I - J	New Depreciable base	$          559,600.00
L	New remaining useful life	8
M = K/L	2018's depreciation expense	$            69,950.00 = ANSWER

• Correct Answer = Option #4: $ 69,950