A company purchased equipment for $400,000 which was estimated to have a useful life of 14...

A company purchased equipment for $400,000 which was estimated to have a useful life of 14 years with a salvage or residual value of $22,000 at the end of that time. Depreciation has been recorded for 2 years on a straight-line basis. In 2020 (year 3), it is determined that the total estimated life should be 17 years with a residual or salvage value of $16,000 at the end of that time.

What is the net book value a the time of the change? write out the number, include a comma where appropriate, do not include decimals, do not use a dollar sign (i.e. 200,000)

What is depreciation expense for 2020?

Solutions

Expert Solution

Depreciation under Straight line method

	depreciation = (Cost of the asset - Salvage Value)/ Useful life of asset
	= ($400,000 - $22,000)/14
	=$378000 / 14
	=$20000 per year

Depreciation expense per year = $27000

Year	Opening Carrying Amount	Depreciation Expense	Book value
2018	4,00,000	27,000	3,73,000
2019	3,73,000	27,000	3,46,000

In 2020 (year 3 ) It is determined that the estimated life is 17 years and residual value of $16000

Therefore Depreciation Expense in 2020 = Book value - Salvage ) / Useful life of Asset

=(346000 - 16,000 ) / 17

= 330,000 / 17

= 19,412

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

Docker Company purchased equipment on July 19, 2016, for $400,000. The estimated useful life is 8...

Docker Company purchased equipment on July 19, 2016, for $400,000. The estimated useful life is 8 years and residual value is $60,000. On April 7, 2022, they sold the equipment for $100,000. Docker rounds depreciation to the nearest month. Required Provide all journal entries necessary for the sale of the equipment under the following conditions: Docker uses straight line depreciation. Docker uses double declining balance depreciation.

Infosys Corp, purchased an equipment for $410,000 which was estimated to have a useful life for...

Infosys Corp, purchased an equipment for $410,000 which was estimated to have a useful life for 10 years with a salvage value of $10,000 at the end of that time. Depreciation has been recorded for 7 years on straight-line basis. In 2014 (year 8), it is determined that the total estimated life should be 15 years with a salvage value of $5,000 at the end of that time. The journal entry to correct the prior year’s depreciation is: Select one:...

Roscoe Co. purchased equipment for $1,000,000 which was estimated to have a useful life of 15...

Roscoe Co. purchased equipment for $1,000,000 which was estimated to have a useful life of 15 years with a salvage value of $25,000 at the end of that time. Depreciation has been entered for 5 years on a straight-line basis. In 2018, it is determined that the total estimated life should be 10 years with no salvage value at the end of that time. Instructions (a) Prepare the entry (if any) to correct the prior years’ depreciation. (b) Prepare the...

Exercise 22-13 Riverbed Co. purchased equipment for $573,000 which was estimated to have a useful life...

Exercise 22-13 Riverbed Co. purchased equipment for $573,000 which was estimated to have a useful life of 10 years with a salvage value of $10,200 at the end of that time. Depreciation has been entered for 7 years on a straight-line basis. In 2018, it is determined that the total estimated life should be 15 years with a salvage value of $5,000 at the end of that time. (a) Prepare the entry (if any) to correct the prior years’ depreciation....

a) A Company purchased equipment for RO 50,000 with an estimated useful life of 20 years....

a) A Company purchased equipment for RO 50,000 with an estimated useful life of 20 years. At the end of the 10 year, company determined that the equipment would last only 5 more years. Does this revision affect depreciation calculated previously? Yes or no, justify your answer. b) You are required to calculate the rate of depreciation and the depreciation to be charged at the end of each year by using reducing balance method for 4 years. Life of the...

ABC company purchased equipment on January 1, 2015, for $50,000, with an estimated useful life of...

ABC company purchased equipment on January 1, 2015, for $50,000, with an estimated useful life of 5 years and an estimated residual value of $5,000. Assume the equipment was sold on April 30th 2017 for $25,000 Prepare journal entries for the following: A) Calculate depreciation expense for 2015 and 2016 using straight line method of depreciation. Prepare the journal entry to record depreciation B) Calculate depreciation for 2017 and record the journal entry C) Prepare the journal entry for the...

BCK company purchased new equipment with an estimated useful life of four years. The cost of...

BCK company purchased new equipment with an estimated useful life of four years. The cost of the equipment was $50,000, and the salvage value was estimated to be $5,000 at the end of four years. The company uses the double-declining-balance method for book depreciation. (i) What is the amount of depreciation for the fourth year of use? (ii) What is the book value of the asset at the end of the third year?

On July 1, 2016, Johnny Company purchased equipment for $550,000. The estimated useful life of the...

On July 1, 2016, Johnny Company purchased equipment for $550,000. The estimated useful life of the equipment is 10-years. It is predicted that the equipment can be sold at the end of the 10-year period for $90,000. Johnny uses the double-declining balance depreciation method. Johnny recorded depreciation normally during 2016, 2017, and 2018. However, because Johnny determined that the equipment was no longer useful to the company, Johnny sold the equipment on June 30, 2019 for $400,000. 1. Based on...

A company purchased equipment for $110,000 that is expected to have a useful life of 5...

A company purchased equipment for $110,000 that is expected to have a useful life of 5 years and a salvage value of $10,000. If double declining balance depreciation is used, what is the accumulated depreciation at the end of Year 2? $74,000 $60,000 $70,400

A company purchased equipment for $100,000 that is expected to have a useful life of 10...

A company purchased equipment for $100,000 that is expected to have a useful life of 10 years and no salvage value. The company sold the equipment at the end of the fourth year of its useful life, at which point it had fair market value of $65,000. If the asset was sold for $55,000 and was being depreciated using the straight line method as was reported at book value, what amount of gain or loss would be reported at the...

Subjects