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An asset was purchased for $118,000 on January 1, Year 1, and originally estimated to have...

An asset was purchased for $118,000 on January 1, Year 1, and originally estimated to have a useful life of 8 years with a residual value of $10,500. At the beginning of the third year, it was determined that the remaining useful life of the asset was only 4 years with a residual value of $2,600. Calculate the third-year depreciation expense using the revised amounts and straight-line method. Round your answer to the nearest dollar.

$22,631

$23,131

$22,131

$21,131

Solutions

Expert Solution

$22,131

Working:

Step-1:Calculation of straight line depreciation

Straight Line Depreciation

(Cost - Salvage Value)/Useful Life

(118000-10500)/8

$ 13,437.50

Step-2:Calculation of book value of asset at the end of year 2

Book Value of asset at the end of 2nd Year

Cost -Accumulated depreciation for 2 years

$ 1,18,000

$ 26,875.00

$ 91,125.00

Working:

Accumulated depreciation for 2 years

Straight Line depreciation x 2

$ 13,437.50

$ 26,875.00

Step-3:Calculation of revised straight line depreciation

Straight Line depreciation

(Book value at the beginning of Year 3- Revised Salvage Value)/Revised Remaining Useful Life

(91125-2600)/4

$ 22,131

ekkarill92 answered 1 year ago

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