Asked by ka ki cheng on Jul 21, 2024
Verified
Equipment costing $80,000 with a useful life of 10 years and a residual value of $8,000 has been depreciated for 6 years by the straight-line method. Assume a fiscal year ending December 31.(a)What is the book value at the end of the sixth year of use?
(b)If early in the seventh year it is estimated that the remaining useful life is 5 years (instead of 4) and the residual value is $6,000, what is the amount of depreciation for the seventh year?
Book Value
The net value of an asset or liability according to its balance sheet account balance, calculated as original cost minus depreciation, amortization, or impairment costs.
Straight-Line Method
A depreciation technique that allocates an equal portion of the initial cost of an asset to each year of the asset's useful life.
Depreciation Expense
The annual charge to expense part of the cost of a tangible asset over its expected service life.
- Absorb knowledge on the basic features of asset depreciation and the influences impacting its operation.
- Execute depreciation calculation by the straight-line method and discern its impact on the ledger accounts.
- Assess the influence of adjusting depreciation estimates on assets' book value and depreciation cost.
Verified Answer
$72,000 / 10 = $7,200
$7,200 × 6 = $43,200
$80,000 - $43,200 = $36,800
(b)($36,800 - $6,000) / 5 = $6,160
Learning Objectives
- Absorb knowledge on the basic features of asset depreciation and the influences impacting its operation.
- Execute depreciation calculation by the straight-line method and discern its impact on the ledger accounts.
- Assess the influence of adjusting depreciation estimates on assets' book value and depreciation cost.
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