Question

Equipment costing $70,000 with a salvage value of $14,000 and an estimated life of 8 years has been depreciated using the straight-line method for 2 years. Assuming a revised estimated total life of 6 years and no change in the salvage value, the depreciation expense for Year 3 would be
a. $10,500.
b. $9,333.
c. $14,000.
d. $7,000.

Answer 1

Answer:The answer is b

Explanation:

Cost - Salvage value /useful life

Cost =$70,000

Salvage value = $14,000

Useful life = 8years

Cost - Salvage value /useful life

70,000-14,000/8

= 56,000/8

=7000

Therefore yearly depreciation = $7,000

Provision for depreciation

Ist year cost - depreciation (70,000 - 7,000) = 63,000

2nd year cost - depreciation (63,000 - 7,000) = 56,000

Net Book value for the 3rd year = 56,000

Assuming a revised total life

= Net Book value /revised total life

= 56,000/6

= $9,333

Therefore depreciation expenses = $9,333

Answer 2

Answer:

depreciation expense =  $10500

correct option is a. $10,500

Explanation:

given data

Equipment costing  = $70,000

salvage value = $14,000

estimated life =  8 years

revised estimated total life = 6 years

to find out

depreciation expense

solution

we know that Depreciation expense per year is here express as

Depreciation expense =  (cost - Salvage value) ÷ useful life      ...................1

put here value we get

Depreciation expense  = $\frac{70000 - 14000}{8}$

Depreciation expense  = $7000 per year

so

book value as on beginning of year 3 is = 70000 - (7000 × 2)

book value as on beginning of year 3 is $56000

so

depreciation expense will be

depreciation expense =  $\frac{56000 - 14000}{4}$

depreciation expense =  $10500

correct option is a. $10,500