Company ABC purchases equipment for $500,000 and estimates its salvage value to be $10,000 with a...
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Company ABC purchases equipment for $500,000 and estimates its salvage value to be $10,000 with a useful life of 10 years. After 3 years, the company realizes that the equipment will only last a total of 6 years with a salvage value of $20,000. What is the depreciation charge for year 4 (assume SL method)? (round to nearest dollar)
Homework Answers
Depreciation expense per year = (Cost - Salvage value)/Useful life
= (500,000 - 10,000)/10 years = 49,000 per year
Book value after 3 years
= 500,000 - (49,000*3 years) = 353,000
Now useful life is revised to 6 years. 3 years have already passed. So, remaining life = 6 years - 3 years = 3 years.
Depreciation for year 4
= (353,000 - 20,000) / 3 years
= 111,000
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