Question

Answer is NOT 3250, 6500, or 1750.

Brief Exercise 11-07 Novak Company purchased a computer for $10,000 on January 1, 2019. Straight-line depreciation is used, based on a 5-year life and a $1,250 salvage value. On January 1, 2021, the estimates are revised. Novak now feels the computer will be used until December 31, 2022, when it can be sold for $625. Compute the 2021 depreciation. (Round answer to 0 decimal places, e.g. 45,892.) Depreciation expense, 2021 $

Answer 1

Year	Depreciation		Carrying amount
31-Dec-19	$1,750	(10,000-1250)/5	$8,250	(10,000-1,750)
31-Dec-20	$1,750	(10,000-1250)/5	$6,500	(8,250-1,750)
On 1st Jan, 2021, Novak Corporation revised useful life till 31 dec 2022 only and residual value of $625.
(Note: Change in estimated useful life or change in residual value are only estimate changes, Hence same should be adjusted prospectively.)
(The Carrying amount as on 01.01.2021 has been deemed as cost of asset on 01.01.2021 and remaining useful life is 2 years)
Year	Depreciation		Carrying amount
31-Dec-21	2938	(6,500-625)/2	$4,462	(6,500-2,938)
31-Dec-22	2937	(6,500-625)/2	$1,525	(4,462-2,937)
31-Dec-23
Hence, Depreciation expense 31-Dec-21 is $ 2,938.

*Please feel free to ask any doubt in the comment section. Please give your valuable feedback if you are satisfied.