Question

In: Accounting

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.)

Solutions

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

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