Luther company uses a predetermined over head rate of $23.40 per direct labor- hour. This predetermined rate was base on a cost
1 answer:
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Answer:
$2,000
Explanation:
where the cost of the delivery truck is $28,000 and a useful life of 5 years with a salvage value of $3,000,
Annual Depreciation =
=
= 5000
Therefore,
After year 1 which is by January 1st, 2019
Net book value of the truck = $28,000 - $5,000
= $23,000
After year 2 which is by January 1st, 2020
Net book value of the truck = $23,000 - $5,000
= $18,000
After year 3 which is by January 1st, 2021
Net book value of the truck = $18,000 - $5,000
= $13,000
After year 4 which is by January 1st, 2022
Net book value of the truck = $13,000 - $5,000
= $8,000
If the useful life of the asset is extended to 7 years from 5 years, the number of years remaining for the asset as at January 1st, 2022 would be extended from 1 year to 3 years.
Therefore, where the residual value is $2,000
Depreciation per year for the remaining 3 years
= (8000 - 2000)/3
= 6000/3
= 2000
Popular Company would report $ 2,000 as depreciation expense for the year ended December 31st, 2022.