Carpenters Inc a manufacturing company acquired equipment on

Carpenters, Inc., a manufacturing company, acquired equipment on January 1, 2017 or $530,000. Estimated useful life of the equipment was seven years and the estimated residual value was $14,000. On January 1, 2020, after using the equipment for three years, the total estimated useful life has been revised to nine total years. Residual value remains unchanged. The company uses the straight-line method of depreciation. Calculate depreciation expense for 2020. (Round any intermediate calculations to two decimal places, and your final answer to the nearest dollar.) O A. S50,476 O B. S58,889 O C. $49,143 O D. S57,333

Solution

Annual depreciation expense under straight line method=(Cost-Residual value)/Useful Life

(530000-14000)/7=$73714.29(Approx)

Hence book value as on January 1,2020=Cost-Accumulated depreciation expense

=530,000-(73714.29*3)

=$308,857.13

Hence revised depreciation expense=($308,857.13-$14000)/6 years[Remaining Useful Life is (9-3)=6 years]

which is equal to

$49143(Approx).