Question

On January 1, 2018, Betty DeRose, Inc. purchased equipment for $95,000. The equipment
was assigned an estimated life of 15 years and a salvage value of $12,500. On
January 1, 2021, Betty DeRose decided the life of the equipment should be changed from
15 to 25 years with a salvage value of $5,900 at the end of the 25 years. Betty DeRose
uses the straight-line method to depreciate its assets.

Calculate the book value of the equipment at December 31, 2023.

I tried working on this for a while and I just need a little help. I'd greatly appreciate any assistance.

Answer 1

• Working

A	Cost	$               95,000.00
B	Residual Value	$               12,500.00
C=A - B	Depreciable base	$               82,500.00
D	Life [in years]	15
E=C/D	Annual SLM depreciation	$                 5,500.00
F = E x 3	3 year Accumulated Depreciation	$               16,500.00
G = A - F	Book value at the time of revision	$               78,500.00
H	New Residual Value	$                 5,900.00
I = G - H	New Depreciable base	$               72,600.00
J = 25 years - 3 years passed	New remaining life	22
K = I/J	New revised depreciation from 2021	$                 3,300.00

--Depreciation from 2018 to 2020 = $ 5500 x 3 years= $ 16500
--Depreciation from 2021 to 2023 = $ 3300 x 3 years = $ 9900
--Total Accumulated Depreciation on 31 Dec 2023 = $ 16500 + 9900 = $ 26,400

• Book Value at Dec 31, 2023
  = Cost – Accumulated Depreciation
  = $ 95000 – 26400
  = $ 68,600 Answer