Answer:
Revised Depreciation charge per year is $2,200
Explanation:
Revised Depreciation can be calculated in 3 steps:
<u>Step 1:</u> Annual Depreciation charge of Equipment using initial estimate
Depreciation charge = (Cost of Asset – Salvage Value) / Useful life
Depreciation charge = ($50,000 - $2,000) / 8 years = $6,000 per year
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<u>Step 2:</u> Calculate Net Book Value of Equipment at the end of year 4
Cost of Asset: $50,000
Less: Accumulated Depreciation of 4 Years ($6,000 x 4): ($24,000)
Net Book Value: $26,000
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<u>Step 3:</u> Calculate Revised Depreciation charge using the revised useful life
Revised Depreciation charge = (Net Book Value of Asset at the end of Year 4 – New Salvage Value) / Revised Useful life
Revised Depreciation charge = ($26,000 - $4,000) / 10 Years = $2,200 per year
