A company used straightline depreciation for an item of equi

A company used straight-line depreciation for an item of equipment that cost $12,900, had a salvage value of $2,400 and a six-year useful life. After depreciating the asset for three complete years, the salvage value was reduced to $1,290 but its total useful life remained the same. Determine the amount of depreciation to be charged against the equipment during each of the remaining years of its useful life:

$2400

$2160

$2120

$1050

$4670

Solution

Detailed Solution :-

Equipment Cost=$12900

Salvage Value=$2400

Method of Straight line Depreciation= (Equipment cost - Salvage Value)/useful life

Depreciation for 1st three years= (12900-2400)/6= $1750 per year

Depreciable value of equipment after 3 years= 12900-(1750*3)= $7650

Salvage value after 3 years= $1290

So amount of depreciation after 3 years= (7650-1290)/3= $2120