I very coast inc purchased a van on January 1 2015 For $800,000 Estimated life o
ID: 2566930 • Letter: I
Question
I very coast inc purchased a van on January 1 2015 For $800,000 Estimated life of the van is 5 years and it’s estimated residual value was $90000. Iveycoast uses the straight line method of depreciation. At the beginning of 2017 the company revised the total estimated life of the asset from 5 years to 4 years. The estimated residual value remains the same as earlier estimated. Calculate the depreciation expense for the year 2017 I very coast inc purchased a van on January 1 2015 For $800,000 Estimated life of the van is 5 years and it’s estimated residual value was $90000. Iveycoast uses the straight line method of depreciation. At the beginning of 2017 the company revised the total estimated life of the asset from 5 years to 4 years. The estimated residual value remains the same as earlier estimated. Calculate the depreciation expense for the year 2017 I very coast inc purchased a van on January 1 2015 For $800,000 Estimated life of the van is 5 years and it’s estimated residual value was $90000. Iveycoast uses the straight line method of depreciation. At the beginning of 2017 the company revised the total estimated life of the asset from 5 years to 4 years. The estimated residual value remains the same as earlier estimated. Calculate the depreciation expense for the year 2017Explanation / Answer
Note for understanding : Change in estimated life of an asset is an example of change in accounting estimate . The entity shall account the impact of such changes in current year & future years but not in past years . That means change in accounting estimate shall have prospective impact on the financial statement.
Depreciation as per SLM = (Cost - Estimated Residual Value) / Estimated life
Total Depreciation recorded in the books till December, 2016 = [ ($800,000 - $90,000) / 5 years] * 2 years = $284,000
WDV at the beginning of the 2017 = $800,000 - $284,000 = $516,000
Life remaining out of the revised estimated life = 2 years (2017 & 2018 )
Therefore Depreciation expenses for 2017 = $516,000 - $90000 / 2 years = $213,000
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