Question
Question: Savin NV purchased a piece of equipment for 50,000. It estimated a 5year life and 2,000 residual value. At the end of year four
Question: Savin NV purchased a piece of equipment for 50,000. It estimated a 5year life and 2,000 residual value. At the end of year four (before the depreciation adjustment), it estimated the new total life to be 8 years and the new residual value to be 4,000. Compute the revised depreciation.
Assume the straight-line method is used and that Savin NV depreciated the equipment for a full year in each of the first three years. After answering the textbooks question, answer the following, assuming the same facts as given: what would be the depreciation expense for year four if Savin NV switched to the Declining Balance method at 2X the SL rate (DDB) for year four and beyond? What would be the depreciation for year five?
Yearly straight-line depreciation expense before useful life revision: |
|
|
Book value and depreciable cost before revision: |
|
|
|
Revised straight-line depreciation expense: |
|
|
Year four depreciation under DDB: |
|
|
|
Year five depreciation under DDB: |
|
|
Calculate revised depreciation as well.
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access with AI-Powered Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started