Question

An asset was purchased for $105,000 on January 1, Year 1 and originally estimated to have a useful life of 12 years with a residual value of $13,500. At the beginning of the third year, it was determined that the remaining useful life of the asset was only 4 years with a residual value of $2,000. Calculate the third-year depreciation expense using the revised amounts and straight-line method. Round your answer to the nearest dollar.

Answer 1

Answer--------Depreciation for year 3 = $21,938

Working

Straight line Method -For year 1 and 2
A	Cost	$ 105,000
B	Residual Value	$ 13,500
C=A - B	Depreciable base	$ 91,500
D	Life [in years left ]	12
E=C/D	Annual SLM depreciation	$ 7,625.00

.

Depreciation schedule-Straight line method- For first 2 complete years
Year	Book Value	Depreciation expense	Accumulated Depreciation	Ending Book Value
1	$        105,000.00	$ 7,625.00	$ 7,625.00	$ 97,375.00
2	$ 97,375.00	$ 7,625.00	$ 15,250.00	$ 89,750.00

.

Straight line Method -For year 3 and onward
A	Ending book value at Year 2 end	$ 89,750
B	Residual Value	$ 2,000
C=A - B	Depreciable base	$ 87,750
D	Life [in years left ]	4
E=C/D	Annual SLM depreciation	$ 21,938