Question

Swifty Company purchased a computer for $8,240 on January 1, 2019. Straight-line depreciation is used, based on a 5-year life and a $1,030 salvage value. On January 1, 2021, the estimates are revised. Swifty now feels the computer will be used until December 31, 2022, when it can be sold for $515. Compute the 2021 depreciation. (Round answer to 0 decimal places, e.g. 45,892.) Depreciation expense, 2021 $enter depreciation expense for 2018 in dollars rounded to 0 decimal places

Answer 1

Answer:

Depreciation expense in 2021 =$2420.50

Depreciation expense in 2019 = $1442

Explanation:

The following steps would be taken to determine the answer

1. Calculate depreciation expense given the initial information  

2. calculate the accumulated depreciation by the second year. Accumulated depreciation is sum of depreciation expense

3. subtract the accumulated depreciation from the cost price of the asset. This would give the book value  

4. calculate the depreciation expense using the new information and the book value  

Straight line depreciation expense = (Cost of asset - Salvage value) / useful life

($8,240 - $1030) / 5 = $1442

Accumulated depreciation by January 2021 = $1442 x 2 = $2884

Book value = $8,240 - $2884 = $5356

New useful life = 2 years

Salvage value = $515

Depreciation expense in 2021 = ($5356 - $515) / 2 = $2420.50