Question

In: Accounting

Hoover Corporation purchased equipment on January 1, 2019, for $610,000. In 2019 and 2020, Hoover depreciated...

Hoover Corporation purchased equipment on January 1, 2019, for $610,000. In 2019 and 2020, Hoover depreciated the asset on a straight-line basis with an estimated useful life of 8 years and a $10,000 residual valie. In 2021, due to changes in technology, Hoover revised the useful life to a total of four years with no residual value. What depreciation would Hoover record for the year 2021 on this equipment?

a) $98,641

b) 230,000

c)100,000

d)72,000

Solutions

Expert Solution

formula for depreciation after the change in useful life = (cost-Revised residual value-accumulated depreciation)/remaining useful life

  • cost = $610,000
  • revised residual value = $0
  • accumulated depreciation = depreciation charged in 2019 & 2020

                                                         2019 =cost -salvage/useful life

                                                        =$610,000-10,000/8

                                                         =$75,000

                                                         2020= same $75,000

                                                accumulated depreciation upto 2020 December= $75,000+75,000 =$150,000

  • remaining useful life = revised useful life- years for which depreciation already provided

                                             =4-2 (2019,2020)

                                            =2

                                                   =$230,000

Thus, answer is b) $230,000

Please upvote if you find this helpful. In case of query please comment.

ekkarill92 answered 1 year ago
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