A company used straight line deperciation for an item of equipment that cost 12,

Question

A company used straight line deperciation for an item of equipment that cost 12,000, had a saps age value of 2000, and a five year useful life . After deperciatin the asset for three complete years , the salvage value was reduced by 1200 and its total useful life was increased from five years to six years. Determine the amount of deperciation to be charges against the machine during each time of the remaining years of its useful life.
a. 1000 B.1800 C. 1467 D.1600 E.2160
A company used straight line deperciation for an item of equipment that cost 12,000, had a saps age value of 2000, and a five year useful life . After deperciatin the asset for three complete years , the salvage value was reduced by 1200 and its total useful life was increased from five years to six years. Determine the amount of deperciation to be charges against the machine during each time of the remaining years of its useful life.
a. 1000 B.1800 C. 1467 D.1600 E.2160

a. 1000 B.1800 C. 1467 D.1600 E.2160

Explanation / Answer

The answer is D 1600

Change in depreciation from revision of useful life

(Historical Cost - Accumulated Depreciation) - Salvage Value /

=

Depreciation
Expense

Remaining Useful Life

Assets cost            12,000 salvage value              2,000 Depreciable value            10,000 Life 5 years Depreciation 1st year              2,000 Depreciation 2nd year              2,000 Depreciation 3rd year              2,000 Accumlated depreciation              6,000 Remaining value              4,000 Add decrease in salvage value                  800 Depreciable value              4,800 Remaing years 3 years Depreciation each year        1,600.00

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