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Brief Exercise 11-7 Novak Company purchased a computer for $8,880 on January 1, 2016. Straight-line depreciation...

Brief Exercise 11-7

Novak Company purchased a computer for $8,880 on January 1, 2016. Straight-line depreciation is used, based on a 5-year life and a $1,110 salvage value. In 2018, the estimates are revised. Novak now feels the computer will be used until December 31, 2019, when it can be sold for $555.

Compute the 2018 depreciation. (Round answer to 0 decimal places, e.g. 45,892.)

Expert Solution

Step-1:Calculation of book value of asset in 2018 before any revision

Cost

$ 8,880

Less Accumulated depreciation

$ 3,108

Book Value

$ 5,772

Working:

# 1

Straight line depreciation

=

(Cost-Salvage Value)/Useful life

=

(8880-1110)/5

=

$ 1,554

# 2

Accumulated depreciation

=

Annual deprecistion*2

=

$ 1,554

*

2

=

$ 3,108

Step-2:Calculation of depreciation for 2018

Straight line depreciation in 2018

=

(Book Value in 2018-Revised Salvage Value)/Revised remaining useful life

=

(5772-555)/2

=

$ 2,609

Thus,

2018 depreciation is

$ 2,609

ekkarill92 answered 2 years ago

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