Change in depreciable life and salvage va1ue. Thompson Financial acquired a computer on January 1, 2006, for

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Change in depreciable life and salvage va1ue. Thompson Financial acquired a computer on January 1, 2006, for $10,000,000. The computer had an estimated useful life of six years and $1,000,000 estimated salvage value. The firm uses the straight-line depreciation method. On January 1, 2008, Thompson Financial discovers that new technologies make it likely that the computer will last only four years in total and that the estimated salvage value will be only $600,000. Compute the amount of depreciation expense for 2008 for this change in depreciable life and salvage value. Assume that the change does not represent an impairment loss.

Salvage Value
Salvage value is the estimated book value of an asset after depreciation is complete, based on what a company expects to receive in exchange for the asset at the end of its useful life. As such, an asset’s estimated salvage value is an important...
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Financial Accounting an introduction to concepts, methods and uses

ISBN: 978-0324789003

13th Edition

Authors: Clyde P. Stickney, Roman L. Weil, Katherine Schipper, Jennifer Francis

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