Revision of Depreciation On January 2. 2009. Mosler, inc., purchased equipment f

Question

Revision of Depreciation On January 2. 2009. Mosler, inc., purchased equipment for $76,000. The equipment was expected to have a $7,000 salvage value at the end of its estimated six-year useful life. Straight-line deprecation has been recorded. Before adjusting the accounts for 2013, Mosler decided that the useful life of the equipment should be extended by two years and the salvage value decreased to $5,000. Round your answer to the nearest dollar. Prepare a journal entry to record depreciation expense on the equipment for 2013. What is the book value of the equipment at the end of 2013 (after recording the depreciation expense for 2013)?

Explanation / Answer

Calculation of depreciation per annum at the time of purchase of the equipment (January 2, 2009) Depreciation(straight -line) = (Cost of the equipment - salvage value)/ usefullife = ($ 76,000 - $ 7,000) /6 = $       11,500 Calculation of Accumulated depreciation as on 2013 Year Depreciation 2009 $       11,500 2010 $       11,500 2011 $       11,500 2012 $       11,500 Accumulated depreciation $       46,000 Calculation of Revised Depreciation from 2013 onwards revised depreciation expense = (Historical Cost -Accumulated Depreciation) - salvage value Remaining useful life = ( $ 76,000 - $ 46,000) - $ 5,000 4 years = $         6,250 a General Journal Debit Credit Dec-13 Depreciation Expense- Equipment $         6,250 Accumulated Depreciation $    6,250 (To record depreciation expense) b Book value at the end of Dec 31, 2013 Purchase cost $       76,000 Less Accumulated depreciation till 2012 $       46,000 Less: Depreciation expense for 2013 $         6,250 Book Value at the end of Dec 31, 2013 $       23,750

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