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VladimirAG [237]
3 years ago
13

company used straight-line depreciation for an item of equipment that cost $20,300, had a salvage value of $5,600 and a six-year

useful life. After depreciating the asset for three complete years, the salvage value was reduced to $2,030 but its total useful life remained the same. Determine the amount of depreciation to be charged against the equipment during each of the remaining years of its useful life:
Business
1 answer:
garik1379 [7]3 years ago
5 0

Answer:

$3,640

Explanation:

Straight line method of depreciation, measures same amount of depreciation over the useful life of the asset.

Depreciation Charge = Cost - Salvage Value / Number of Useful Life

<u>Depreciation for the each of the First 3 years :</u>

Depreciation Charge = Cost - Salvage Value / Number of Useful Life

                                   = ($20,300 - $5,600) / 6

                                   = $2,450

Accumulated Depreciation = $2,450 × 3

                                             = $7,350

<u>New Depreciation Charge After 3 years:</u>

Depreciation Charge = (Cost - Sum of Previous Depreciation Charges - New Salvage Value) / Number of Remaining Useful Life

                                   = ($20,300 - $7,350 - $2,030) / 3

                                   = $3,640

Therefore, the amount of depreciation to be charged against the equipment during each of the remaining years of its useful life would be $3,640 .

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Answer:

<u>Budgeted functional income statement for 2015</u>

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Less: Estimated uncollectible accounts ($2,204,800 × 2 %)         ($44,096)

Net sales                                                                                        $2,160,704

Cost of goods sold (1,100,000 × 1.03)                                          ($1,133,000)

Gross profit                                                                                     $1,027,704

Operating expenses (475,000 × 1.10)                                            ($522,500)

Depreciation                                                                                     ($25,000)

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Make the adjustments stated on the 2014 Income Statement.

For Operating Expenses, it is wise to first remove the depreciation expense and apply the increment of 10% to reflect Operating Costs for 2015.

Treat Depreciation Expense separately and at the same amount as for 2014, since depreciation is calculated on straight line method.

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