On January 2, 2015, the Matthews Band acquires sound equipment for concert perfo

Question

On January 2, 2015, the Matthews Band acquires sound equipment for concert performances at a cost of S65,800. The band estimates it will use this equipment for four years. It estimates that after four years it can sell the equipment for $2,000. Matthews Band uses straight-line depreciation but realizes at the start of the second year that due to concert bookings beyond expectations, this equipment will last only a total of three years. The salvage value remains unchanged. Compute the revised depreciation for both the sec- ond and third years

Explanation / Answer

Depreciation for 2015 = (65800-2000)/4= 15950 Book value at the endof 2015 = 65800-15950= 49850 Revised depreciation =(49850-2000)/2= 23925

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