Question

(Please show work)

Madison Corporation acquired a machine for $32,000 and has recorded depreciation for two years using the​straight-line method over a five​-year life and $9,000 residual value. At the start of the third year of​ use, Madison revised the estimated useful life to a total of 10 years. Estimated residual value declined to​ $0.How much depreciation should Madison record in each of the​ asset's last eight years​ (that is, year 3 through year​ 10), following the​ revision?

                  $2,850

Answer 1

Answer In order to reflect more accurately the pattern of economic benefits came to notice the estimates of useful life or residual value of an asset may be revised in subsequent accounting periods. In such cases, it will be necessary to account for the effects of revision in estimates prospectively. Depreciation expense = (Cost-Revised Residual Value-Accumulated Depreciation) ס Revised Remaining Useful Life Where Accumulated depreciation Total depreciation that has been charged in previous accounting periods since the capitalization of the asset Revised remaining useful life = Estimated number of useful years or months of the asset remaining since the last accounting period in which depreciation was charged. Accumulated Depreciation [(S32,000-S9,000)/5]x 2 Years Revised remaining useful life 8 Years Depreciation should Madison record in each of the asset's last eight years Cost - Revised Residual Value - Accumulated Depreciation) - Revised Remaining Useful Life -$ 9,200 -(32,000 - 0-9,200) - $2,850 8 Years