Thornton Industries purchased a machine for $50,000 and is depreciating it with

Question

Thornton Industries purchased a machine for $50,000 and is depreciating it with the straight-line method over a life of 10 years, using a residual value of $ 3,400 . At the beginning of the sixth year, an extraordinary repair was made costing $4,800, the estimated useful life was extended to 13 years, and no change was made to the estimated residual value.

Calculate depreciation expense for year 6.

Thornton Industries purchased a machine for $50,000 and is depreciating it with the straight-line method over a life of 10 years, using a residual value of $ 3,400 . At the beginning of the sixth year, an extraordinary repair was made costing $4,800, the estimated useful life was extended to 13 years, and no change was made to the estimated residual value.

Explanation / Answer

Calculate depreciation expense for year 6. Book value $50,000 Less: Salvage Value $ 3,400 Depreciable value $46,600 Depreciation per year $4,660 Depreciation for 5 years $23,300 Book value as on 6th year $26,700 (50,000 – 23,300) Additions $4,800 Total Value $31,500 Less Salvage value $ 3,400 Depreciable value $28,100 Depreciation per year $3512.50 ($28,100 ÷ 8) depreciation expense for year 6. = $3512.50

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