Question

Fellingham Corporation purchased equipment on January 1, 2014, for $272,000. The company estimated the equipment would have a useful life of 10 years with a $20,800 residual value. Fellingham uses the straight-line depreciation method. Early in 2016, Fellingham reassessed the equipment's condition and determined that its total useful life would be only six years in total and that it would have no salvage value. How much would Fellingham report as depreciation on this equipment for 2016?$50,240.$36,960.$52,440.$55,440.

Answer 1

Answer:

$55,440

Explanation:

The computation of depreciation is shown below:-

Originally annual depreciation estimated = $272,000 - $20,800 ÷ 10

= $25,120

Depreciation totally charged for the years 2014 and 2015 = $25,120 × 2

= $50,240

Depreciation to be charged for the year 2016 = Original cost - Depreciation charged - Salvage value ÷ Remaining life

= $272,000 - $50,240 - 0 ÷ 4

= $55,440

Therefore for computing the depreciation we simply applied the above formula.