Question

The Donut Stop acquired equipment for $19,000. The company uses straight-line depreciation and estimates a residual value of $3,000 and a four-year service life. At the end of the second year, the company estimates that the equipment will be useful for four additional years, for a total service life of six years rather than the original four. At the same time, the company also changed the estimated residual value to $1,200 from the original estimate of $3,000.

Answer 1

Answer:

Instructions are listed below.

Explanation:

Giving the following information:

The Donut Stop acquired equipment for $19,000. The company uses straight-line depreciation and estimates a residual value of $3,000 and a four-year service life. At the end of the second year, the company estimates that the equipment will be useful for four additional years, for a total service life of six years rather than the original four. At the same time, the company also changed the estimated residual value to $1,200 from the original estimate of $3,000.

A) Annual depreciation= (original cost - salvage value)/estimated life (years)

Annual depreciation= (19,000 - 3,000)/4= $4,000

B) Book value= 16,000 - 8,000= 8,000

Annual depreciation= (8,000 - 1,200)/4= 1,700