Change in Estimate Assume that Bloomer Company purchased a new machine on Januar
ID: 2573749 • Letter: C
Question
Change in Estimate
Assume that Bloomer Company purchased a new machine on January 1, 2017, for $80,000. The machine has an estimated useful life of nine years and a residual value of $8,000. Bloomer has chosen to use the straight-line method of depreciation. On January 1, 2019, Bloomer discovered that the machine would not be useful beyond December 31, 2022, and estimated its value at that time to be $2,000.
Required:
1. Calculate the depreciation expense, accumulated depreciation, and book value of the asset for each year 2017 to 2022. If necessary, round any depreciation calculations to the nearest dollar.
Year Depreciation
Expense Accumulated
Depreciation
Book Value 2017 $ $ $ 2018 2019 2020 2021 2022
Explanation / Answer
Depreciation p.a. = Original Cost- Salvage Value/ Life of Asset
=$80,000-$8,000/9
=$72,000/9
=$8,000
Depreciation from Jan 1, 2017 to Dec 31, 2018 for 2 years =$8,000 x 2=$16,000
Carrying value of Asset on Jan 1, 2019 = Original Cost- Accumulated Depreciation
=$80,000-$16,000
=$64,000
Remaining life from Jan 1, 2019 to Dec 31, 2022= 4 years
New Salvage=$2,000
Revised Depreciation= Revised Carrying Cost- New Salvage Value/ Remaining life
=$64,000-$2,000/4
=$62,000/4
=$15,500
Year
Depreciation Expense
Accumulated Depreciation
Book Value
2017
$ 8,000
$ 8,000
$ 72,000
2018
$ 8,000
$ 16,000
$ 64,000
2019
$ 15,500
$ 31,500
$ 48,500
2020
$ 15,500
$ 47,000
$ 33,000
2021
$ 15,500
$ 62,500
$ 17,500
2022
$ 15,500
$ 78,000
$ 2,000
Book Value at the end of each year
Year 2017: Book Value at the end of year
= Original Cost- Depreciation Expense = $80,000-$8,000 = $72,000
Year 2018: Book Value at the end of year
= Book Value at the end of Previous year- Depreciation Expense=$72,000-$8,000=$64,000
Year 2019: Book Value at the end of year
= Book Value at the end of Previous year - Depreciation Expense=$64,000-$15,500=$48,500
Year 2020: Book Value at the end of year
= Book Value at the end of Previous year - Depreciation Expense=$48,500-$15,500=$33,000
Year 2021: Book Value at the end of year
= Book Value at the end of Previous year - Depreciation Expense=$33,000-$15,500=$17,500
Year 2022: Book Value at the end of year
= Book Value at the end of Previous year - Depreciation Expense=$17,500-$15,500=$2,000
Year
Depreciation Expense
Accumulated Depreciation
Book Value
2017
$ 8,000
$ 8,000
$ 72,000
2018
$ 8,000
$ 16,000
$ 64,000
2019
$ 15,500
$ 31,500
$ 48,500
2020
$ 15,500
$ 47,000
$ 33,000
2021
$ 15,500
$ 62,500
$ 17,500
2022
$ 15,500
$ 78,000
$ 2,000
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