Question

Carpenters​ Company, a manufacturing​ company, acquired equipment on January​ 1, 2017 for​ $510,000. Estimated useful life of the equipment was seven years and the estimated residual value was​ $12,000. On January​ 1, 2020, after using the equipment for three​ years, the total estimated useful life has been revised to nine total years. Residual value remains unchanged. The company uses the​ straight-line method of depreciation. Calculate depreciation expense for 2020.​ (Round any intermediate calculations to two decimal​ places, and your final answer to the nearest​ dollar.)

Answer 1

Answer:

$47,428.50

Explanation:

For computing the depreciation expense for 2020,  first we have to determine the depreciation expense so that we can find the book value of an asset

So, under the straight-line method, the depreciation expense for 2017 would be

= (Original cost - residual value) ÷ (useful life)  

= ($510,000 - $12,000) ÷ (7 years)  

= ($498,000) ÷ (7 years)  

= $7,1143

For three years, the depreciation would be

= $7,1143 × 3 years

= $213,429

In this method, the depreciation is same for all the remaining useful life

Now the ending book value would be

= Acquired value of an asset - accumulated depreciation  

= $510,000 - $213,429

= $296,571

Now the depreciation expense for 2020 would be

= (Ending book value - residual value) ÷ (remaining life)  

= ($296,571 - $12,000) ÷ (6 years)  

= ($284,571) ÷ (6 years)  

= $47,428.50

The remaining life would be

= 9 years - 3 years

= 6 years