Question

On January 1, 2018, Harlow Company paid $156,000 to purchase a piece of
equipment. Before the equipment could be used, Harlow had to spend $6,000
to put the equipment in working order.

The equipment was assigned a useful life of 12 years and a salvage value
of $9,000. The straight-line method will be used to record depreciation
on the equipment.

On January 1, 2025, Harlow Company decided the life of the equipment should
be revised from 12 to 15 years with a salvage value of $5,150 at the end
of the 15 years.

Calculate the book value of the equipment at December 31, 2026.

Answer 1

Particulars	Amount
Cost of Equipment	$       156,000
Additional Cost to put the equipment in working order	$            6,000
Total Cost	$       162,000
Salvage Value	$            9,000
Depreciable Value	$       153,000
Useful life	$                  12
Depreciation Amount per year	$         12,750

Particulars	Amount	Calculations
Depreciation till January 1, 2025	$   89,250	$12,750 * 7 years
Book Value as on January 1, 2025	$   72,750	$162,000 - $89,250
Salvage Value	$      5,150
Depreciable Value	$   67,600
Remaining Useful life	8 Years
Depreciation Amount per year	$      8,450

Particulars	Amount
Book Value as on January 1, 2025	$   72,750
Depreciation Amount for 2025	$      8,450
Depreciation Amount for 2026	$      8,450
Book Value as on December 31, 2026	$   55,850