At the beginning of 2012, Mazzaro Company acquired equipment costing $136,200. I

Question

At the beginning of 2012, Mazzaro Company acquired equipment costing $136,200. It was estimated that this equipment would have a useful life of 6 years and a salvage value of $13,620 at that time. The straight-line method of depreciation was considered the most appropriate to use with this type of equipment. Depreciation is to be recorded at the end of each year.

During 2014 (the third year of the equipment

At the beginning of 2012, Mazzaro Company acquired equipment costing $136,200. It was estimated that this equipment would have a useful life of 6 years and a salvage value of $13,620 at that time. The straight-line method of depreciation was considered the most appropriate to use with this type of equipment. Depreciation is to be recorded at the end of each year. During 2014 (the third year of the equipment's life), the company's engineers reconsidered their expectations, and estimated that the equipment's useful life would probably be 7 years (in total) instead of 6 years. The estimated salvage value was not changed at that time. However, during 2017 the estimated salvage value was reduced to $6,810. Indicate how much depreciation expense should be recorded each year for this equipment, by completing the following table.

Explanation / Answer

As per relevant Principles of accounting and depreciation the amount of depreciation as computed by engineers as on 2012 shall be
=(Purchase price-salvage value) / Number of years expected to be use

=(136200-13620)/6

=$20430

This shall be the amount of depreciation for 2013 as well

Now the engineers reconsidered the life of the equipment to be 7 years

Value of equipment as on the opening date of 2014=$136200-(20430*2)

=$95340

Now the re computed depreciation per year shall be=$(95340-13620)/5

=$16344

This shall be the depreciation for the years 2014,15,16

At the beginning of 2017 the value of equipment in the books shall be=$95340-(16344*3)

=$46308

Now the engineers have reconsidered the salvage value of the equipment as $6810

hence depreciation amount for the left years shall be=($46308-6810)/2

=$19749

Summary of depreciation is

Year

Depreciation ($)

Accumulated Depreciation($)

2012

20430

20430

2013

20430

40860

2014

16344

57204

2015

16344

73548

2016

16344

89892

2017

19749

109641

2018

19749

129390

Year

Depreciation ($)

Accumulated Depreciation($)

2012

20430

20430

2013

20430

40860

2014

16344

57204

2015

16344

73548

2016

16344

89892

2017

19749

109641

2018

19749

129390

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