In: Accounting
Apex Fitness Club uses straight-line depreciation for a machine costing $23,860, with an estimated four-year life and a $2,400 salvage value. At the beginning of the third year, Apex determines that the machine has three more years of remaining useful life, after which it will have an estimated $2,000 salvage value. Required: 1. Compute the machine’s book value at the end of its second year. 2. Compute the amount of depreciation for each of the final three years given the revised estimates.
1 | |
Book value at the end of Year | |
Cost | $23,860 |
Accumulated depreciation 2 years | ($10,730) |
Book value at point of revsion | $13,130 |
Two years' accumulated depreciation |
[($23,860 (–) $2,400) / 4 years] × 2
years for 2 years = $10,730 |
10,500 | |
2 | |
Revised depreciaion year 3-5 years | |
Book value at point of revision | $13,130 |
Revised salvage value | $2,000 |
Remaining depreciable cost | $11,130 |
Years of life remaining | 3 years |
Revised annual depreciation years | $11,130/3 |
(3-5) | |
$3,710 |