Answer: $63,625
Explanation:
First calculate the new Accumulated Depreciation.
Because there was an overhaul, this overhaul Reduces the depreciation of the machinery by the amount spent on the Overhaul.
Depreciation per year using Straight line is ignoring the old salavage value,
= 900,000 / 10
= $90,000
2015 to 2021 has been 6 years so,
= 90,000 * 6
= $540,000
The overhauling reduces the Accumulated Depreciation balance by it's amount so,
= 540,000 - 193,000
= $347,000
$347,000 is the new Accumulated Depreciation.
The book value of the machinery is therefore,
= 900,000 - 347,000
= $553,000
The calculate the new depreciation expense,
= 553,000 - 44,000 (new salvage balance)
= $509,000/ 8 years ( 4 years added by overhaul and 4 years remaining from original period)
= $63,625 per year
