Question

Tops Co. purchases equipment for $12,000 and has been using straight-line depreciation, estimating a 5-year life and $500 salvage value. At the beginning of the third year, Tops decides to use the equipment for a total of 6-years with no salvage value. Compute the revised depreciation for the third year.

Answer 1

Answer:1850

Explanation:

Answer 2

Answer:

According to the straight-line depreciation, this number can be obtained by dividing the difference between an asset's cost and its expected salvage value.

Depreciation = Asset's Cost - Expected Salvage Value ÷ Expected Years of use

Explanation:

In the case of Tops Co., they purchase equipment for $12,000 - $500 of Salvage Value expected ÷ 5  Expected years of use

The estimated depreciation will be $2,300 for 5 years

At the beginning of the third year Tops Co. decided to use the equipment for 6 years and no salvage value.

The remaining purchase value will be $12,000 - $2,300 (x3) = $5,100

Apply again the formula described above and our answer will be:

The revised estimated depreciation is $1,700 for the remaining three years.