Question

Raven Flock  purchased a machine costing 50,000 and is depreciating it over a 10‐year estimated useful life with a residual value of $6,000. At the beginning of the eighth year, a major overhaul on it was completed at a cost of $16,000, and the total estimated useful life was changed to 12 years with the residual value unchanged. How much is the year 8 depreciation expense assuming use of the straight‐line depreciation method? (Round to the nearest dollar. No commas or $)

Answer 1

Answer:
Depreciation per Year          =    (Cost (-) Residual Value ) / Useful Life          =   ( $ 50,000 (-) $ 6,000 ) / 10 Years          =     $ 44,000 / 10 Years	$ 4,400
Accumulated Depreciation        = Depreciation per Year x 7 Years        =   $ 4,400 x 7	$ 30,800
Book Value at beginning of Year 8                =   $ 50,000 (-) $ 30,800	$ 19,200
Add: Overhaul	$ 16,000
Revised cost	$ 35,200
Less: residula Value	($ 6,000)
	$ 29,200
Remaining Life = 12 Years (-) 7 Years = 5 Years
year 8 depreciation expense              = $ 29,200 / 5 Years	$ 5,840