Question

In: Accounting

Bonita Company purchased a computer for $8,720 on January 1, 2019. Straight-line depreciation is used, based...

Bonita Company purchased a computer for $8,720 on January 1, 2019. Straight-line depreciation is used, based on a 5-year life and a $1,090 salvage value. In 2021, the estimates are revised. Bonita now feels the computer will be used until December 31, 2022, when it can be sold for $545. Compute the 2021 depreciation. (Round answer to 0 decimal places, e.g. 45,892.) Depreciation expense, 2021

Solutions

Expert Solution

Depreciation for 2021 =$2,562

Working

Straight line Method for year 2019 and 2020
A Cost $ 8,720
B Residual Value $ 1,090
C=A - B Depreciable base $ 7,630
D Life [in years left ]                                  5
E=C/D Annual SLM depreciation $ 1,526

.

Depreciation schedule-Straight line method
Year Book Value Depreciation expense Accumulated Depreciation Ending Book Value
2019 $ 8,720 $ 1,526 $ 1,526 $ 7,194
2020 $ 7,194 $ 1,526 $ 3,052 $ 5,668

.

Straight line Method -For 2021
A Ending book value at December 31, 2020 $ 5,668
B Residual Value $ 545
C=A - B Depreciable base $ 5,123
D Life [in years left ] (4-2=2)                                  2
E=C/D Annual SLM depreciation $ 2,562

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