Question

At the beginning of 2018, Whispering Winds Company acquired equipment costing $83,600. It was estimated that this equipment would have a useful life of 6 years and a salvage value of $8,360 at that time. The straight-line method of depreciation was considered the most appropriate to use with this type of equipment. Depreciation is to be recorded at the end of each year.

During 2020 (the third year of the equipment’s life), the company’s engineers reconsidered their expectations, and estimated that the equipment’s useful life would probably be 7 years (in total) instead of 6 years. The estimated salvage value was not changed at that time. However, during 2023 the estimated salvage value was reduced to $5,000.

Indicate how much depreciation expense should be recorded each year for this equipment, by completing the following table.

Year		Depreciation Expense		Accumulated Depreciation
2018		$enter a dollar amount		$enter a dollar amount
2019		enter a dollar amount		enter a dollar amount
2020		enter a dollar amount		enter a dollar amount
2021		enter a dollar amount		enter a dollar amount
2022		enter a dollar amount		enter a dollar amount
2023		enter a dollar amount		enter a dollar amount
2024		enter a dollar amount		enter a dollar amount

Answer 1

Based on the information available in the question, we can answer as follows:-

Year	Depreciation Expense	Accumulated Depreciation	Carrying Value
2018	12,540	12,540	71,060
2019	12,540	25,080	58,520
2020	10,032	35,112	48,488
2021	10,032	45,144	38,456
2022	10,032	55,176	28,424
2023	11,712	66,888	16,712
2024	11,712	78,600	5,000

The depreciation expense under the Straight line method is :- (Cost of the asset - Salvage Value)/Estimated life of the asset

The Depreciation expense for the period 2018 - 2019 is :- (83,600-8,360)/6 = $12,540 per year

The Depreciation expense for the period 2020 - 2022 is :- (Carrying value at the beginning of 2020 - Salvage value)/Remaining life of the asset

(58,520-8,360)/5 = $10,032 per year

The Depreciation expense for the period 2023 - 2024 is :- (Carrying value at the beginning of 2022 - Salvage Value)/Remaining life of the asset

($28,424 - $5,000)/2 = $11,712 per year.

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