The audit senior has asked you to perform analytical procedures to estimate the reasonableness of recorded depreciation

Question:

The audit senior has asked you to perform analytical procedures to estimate the reasonableness of recorded depreciation expense of the delivery vehicles of a client. Changes in the account occurred pretty much evenly during the year. The estimated useful life is 6 years. Estimated is 10% of original cost. Straight-line depreciation is used. Additional information:
Delivery Equipment (per General Ledger)
Beginning balance ......... $380,500
Additions ........ 154,000
Disposals ......... (95,600)
Ending balance ....... $438,900
Current year depreciation expense per books—$60,500

Required
Estimate the amount of depreciation expense for the year using analytical procedures. Is the recorded depreciation expense acceptable? Explain, including a discussion of how precise an analytical procedure has to be to support an account balance.

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...