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SIZIF [17.4K]
3 years ago
13

The following information is available on a depreciable asset owned by Mutual Savings Bank: Purchase date July 1, Year 1 Purchas

e price $85,000 Salvage value $10,000 Useful life 10 years Depreciation method straight-line The asset's book value is $70,000 on July 1, Year 3. On that date, management determines that the asset's salvage value should be $5,000 rather than the original estimate of $10,000. Based on this information, the amount of depreciation expense the company should recognize during the last six months of Year 3 would be:
Business
1 answer:
Volgvan3 years ago
8 0

Answer:

depreciation expense 4,062.5 debit

  accumulated depreciation     4,062.5 credit

Explanation:

We will do the depreciation without doing retrospective adjustement as this is new information not an accounting mistake.

book value: 70,000

change in salvage value: 5,000

depreciable ammount : book value - new salvage value:

70,000 - 5000 = 65,000 depreciable amount

useful life: 8 years

65,000 / 8 = 8.125‬

half-year depreication: 8,125 / 2 = 4,062.5

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