Falcon Corporation purchased a depreciable asset for $840,000 on January 1, 2015. The estimated salvage value...
Falcon Corporation purchased a depreciable asset for $840,000 on
January 1, 2015. The estimated salvage value is $84,000, and the
estimated total useful life is 9 years. The straight-line method is
used for depreciation. In 2018, Falcon changed its estimates to a
total useful life of 5 years with a salvage value of $140,000. What
is 2018 depreciation expense?
Homework Answers
Annual depreciation = (Cost price – Residual value)/Useful life
= (840,000 - 84,000)/9
= $84,000
Accumulated depreciation from 2015 to 2017 = 84,000 x 3
= $252,000
Book value of asset on January 1, 2018 = Cost price - Accumulated depreciation from 2015 to 2017
= 840,000 - 252,000
= $588,000
New depreciable cost = Book value of asset – Revised residual value
= 588,000 - 140,000
= $448,000
Revised annual depreciation = New depreciable cost/Remaining useful life
= 448,000/2
= $224,000
Thus, 2018 depreciation expense = $224,000
Kindly comment if you need further assistance. Thanks
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