Question

Bridgeport Corp. purchased a piece of equipment for $36,000. It estimated a 8-year life and $1,440 salvage value. At the end of year 4 (before the depreciation adjustment), it estimated the new total life to be 10 years and the new salvage value to be $2,880.

Compute the revised depreciation. Company uses straight-line depreciation method. (Round answer to 0 decimal places, e.g. 125.)

Revised depreciation: ???

Answer 1

Correct Answer:

The revised depreciation: $ 2,640.00

working:

Straight line Method
A	Cost	$          36,000.00
B	Residual Value	$            1,440.00
C=A - B	Depreciable base	$          34,560.00
D	Life [in years left ]	8
E=C/D	Annual SLM depreciation	$            4,320.00

Depreciation Schedule- Straight line method
End of year amounts
Year	Book Value	Depreciation expense	Ending Book Value
1	$          36,000.00	$            4,320.00	$           31,680.00
2	$          31,680.00	$            4,320.00	$           27,360.00
3	$          27,360.00	$            4,320.00	$           23,040.00
4	$          23,040.00	$            4,320.00	$           18,720.00

Book value of equipment after 4 years = $ 18720.00

New Depreciation Expense will be:

Straight line Method
A	Cost	$          18,720.00
B	Residual Value	$            2,880.00
C=A - B	Depreciable base	$          15,840.00
D	Life [in years left ] ( 10-4 )	6
E=C/D	New Annual SLM depreciation	$            2,640.00

End of Answer.

Thanks