Question

An asset was purchased for $54,000 and originally estimated to have a useful life of 10 years with a residual value of $4,900. After two years of straight-line depreciation, it was determined that the remaining useful life of the asset was only 2 years with a residual value of $1,960. a) Determine the amount of the annual depreciation for the first two years. $ b) Determine the book value at the end of Year 2. $ c) Determine the depreciation expense for each of the remaining years after revision. $

Answer 1

Answer:

Annual depreciation for the first two years is  $4,910.00  

Book value at the end of year 2  $44,180.00  

depreciation expense for each of the remaining years after revision is $21,110.00

Explanation:

The initial depreciation =cost-salvage value/useful life

cost was $54,000

salvage value is $4,900

useful life was 10 years

initial depreciation charge=($54,000-$4,900)/10=$4,910.00  

Book value at the end of year 2=cost-depreciation for first 2 years

book value at the end of year 2=$54,000-($ 4,910*2)=$44,180.00  

Depreciation expense for remaining years=($44,180-$1,960)/2=$21,110.00