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kkurt [141]
3 years ago
14

Penny Lane and Associates purchased a generator on January 1, 2015, for $6,300. The generator was estimated to have a five-year

life and a salvage value of $600. At the beginning of 2017, the company revised the expected life of the asset to six years and revised the salvage value to $300. Using straight-line depreciation, the depreciation expense recorded in 2017 would
Business
1 answer:
s2008m [1.1K]3 years ago
7 0

Answer:

The depreciation expense recorded in 2017 will be $930

Explanation:

Cost of the generator = $6,300

Initial useful life = 5 years

initial salvage value = $600

Revised useful life = 6 years

Revised  salvage value = $300

Now,

Initial Annual depreciation = [ Cost - Initial salvage value ] ÷ Initial useful life

= [ $6,300 - $600 ] ÷ 5

= $1,140

Therefore,

accumulated depreciation till the end of 2016

= 2 × $1,140

= $2,280

Therefore,

Book value for the year 2017

= Cost - accumulated depreciation till the end of 2016

= $6,300 - $2,280

= $4,020

Therefore,

The revised annual depreciation

= [ Book value for 2017 - Revised salvage value ] ÷ Remaining useful life

= [ $4,020 - $300 ] ÷ (6 - 2)

= $930

Hence,

the depreciation expense recorded in 2017 will be $930

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