Please help with fields that are in yellow. Thanks. On January 2, 2017, the Matt
ID: 2335816 • Letter: P
Question
Please help with fields that are in yellow. Thanks.
On January 2, 2017, the Matthews Band acquires sound equipment for concert performances at a cost of $67,800. The band estimates it will use this equipment for five years. It estimates that after five years it can sell the equipment for $2,000. Matthews Band uses straight-line depreciation but realizes at the start of the second year that due to concert bookings beyond expectations, this equipment will last only a total of three years. The salvage value remains unchanged. Compute the revised depreciation for both the second and third years. Book value at point of revision Remaining depreciable cost Depreciation per year for years 2 and 3Explanation / Answer
Cost of equipment =$67,800
Useful life = 5 years
Salvage value =$2,000
Depreciation cost = Cost - Salvage value =$67,800- $2,000 = $ 65,800
Annual depreciation under SLM method = Depreciable cost/Useful life
= $65,800/5 Years
= $13,160
After 1 year,Mathews Band estimates that this equipment will last only a total 3 years.
Hence remaining life of equipment = 3-1 = 2 years
Book value of equipment at point of revision = $67,800 - $13,160 = $54,640
Remaining depreciable cost = book value at point of revision - Salvage value
= $54,640 - $2,000
= $52,640
Annual depreciation for years 2 and 3 = Remaining depreciable cost/ Remaining useful life
= $52,640 / 2
= $26,320
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