Ace Leasing acquires equipment and leases it to customers under long-term sales-type leases. Ace earns interest under these arra
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Answer:
1. Book value at end of year 2 = $13,130
2. Depreciation from year 3 for last 3 years = $3,710 each year, that is $11,130 for three years.
Explanation:
As for the provided details, we have:
Cost of machinery = $23,860
Expected life = 4 years
Salvage value = $2,400
Straight line depreciation =
Under straight line method depreciation remains constant for life of asset.
Book value at end of year 2 = $23,860 - ($5,365 2) = $13,130
Thereafter in the beginning of year 3 the estimate is made to realize that the total remaining life expected is 3 years, with salvage value $2,000
Thus, depreciation from year 3 =
Therefore, depreciation from year 3 to year 5 = $3,710 each year.
Total depreciation of last 3 years = $3,710 3 = $11,130