Question

Cus Co acquired some tools on 1/1/10 costing $540,000. Depreciable value was set at $480,000 with an expected useful life of 16 years. The straight-line method is used to calculate depreciation. During 2016, the estimated salvage value was decreased by $8,000 and the expected useful life was determined to be 17 years from date of acquisition.

** REQUIRED: 1) Determine the following: a) amount of depreciation expense FYE 12/31/10. 30000 b) book value of the tools at 12/31/15. 360000 c) amount of depreciation expense FYE 12/31/16. 28000 d) balance of accumulated depreciation at 12/31/17. 236000 e) book value of the tools at 12/31/18. 276000 ​Here are the correct answers, can you please explain how they were computed. Thank you.

Answer 1

Depreciation Table

Year Ended	Opening Value	Depreciation	Accumulated Depreciation	Closing Value
31-12-2010	$ 540000	$ 30,000	$ 30000	$ 510000
31-12-2011	$ 510000	$ 30,000	$ 60000	$ 480000
31-12-2012	$ 480000	$ 30,000	$ 90000	$ 450000
31-12-2013	$ 450000	$ 30,000	$ 120000	$ 420000
31-12-2014	$ 420000	$ 30,000	$ 150000	$ 390000
31-12-2015	$ 390000	$ 30,000	$ 180000	$ 360000
31-12-2016	$ 360000	$ 28000	$ 208000	$ 332000
31-12-2017	$ 332000	$ 28000	$ 236000	$ 304000
31-12-2018	$ 304000	$ 28000	$ 264000	$ 276000

Depreciation upto 31-12-2015      = Depreciable Value / Usefull Life

= $ 480000 / 16 years

= $ 30,000 / Year

Revised Salvage Value        =          ( $ 540000 - $ 480000 ) - $ 8000 = $ 52000

Remaining usefull life from 2016 = 17 Years – 6 Years already completed

                                                            = 11 Years

Therefore,

Depreciation from 2016 onwards = ( $ 540000 - $ 180000 -$ 52000 ) / 11 Years

                                                            = $ 308000 / 7 Years

                                                            = $ 28,000 Years