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A company purchased equipment at the beginning of 2021 for $500,000. The equipment is depreciated on...

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Accounting

A company purchased equipment at the beginning of 2021 for$500,000. The equipment is depreciated on a straight-line basiswith an estimated useful life of nine years and a $50,000 residualvalue. At the beginning of 2024, the company revised theequipment’s useful life to a total of seven years (four more years)because of changing customer demand. The company also revised theexpected residual value to $30,000. What depreciation expense wouldthe company record for the year 2024 on this equipment? MultipleChoice $80,000. $87,500. $50,000. $75,000.

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4.0 Ratings (692 Votes)

Correct answer--------$80,000

Working

Straight line Method For year 2021 to 2023
A Cost $ 500,000
B Residual Value $ 50,000
C=A - B Depreciable base $ 450,000
D Life [in years left ]                                  9
E=C/D Annual SLM depreciation $ 50,000

.

Depreciation schedule-Straight line method
Year Book Value Depreciation expense Accumulated Depreciation Ending Book Value
2021 $ 500,000 $ 50,000 $ 50,000 $ 450,000
2022 $ 450,000 $ 50,000 $ 100,000 $ 400,000
2023 $ 400,000 $ 50,000 $ 150,000 $ 350,000

.

Straight line Method -For 2024
A Carrying value at 2024 beginning $ 350,000
B Residual Value $ 30,000
C=A - B Depreciable base $ 320,000
D Life [in years left ]                                  4
E=C/D Annual SLM depreciation $ 80,000

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