49 Equipment costing 30000 with a salvage value of 6000 and

49. Equipment costing $30,000 with a salvage value of $6,000 and an estimated life of 8 years has been depreciated using the straight-line method for 2 years. Assuming a revised estimated total life of 5 years and no change in the salvage value, the depreciation expense for 3 years would be A) $3,600 B) $8,000 C) S6,000 D) $4,800 Page 11

Solution

49) C) $ 6,000 Working: a. Calculation of straight line depreciation = (Cost-salvage value)/useful Life = (30000-6000)/8 =         3,000 b. Accumulated depreciation for 2 years =         3,000 x 2 =         6,000 c. Book Value at the end of year 2 = Cost -Accumulated depreciation =      30,000 -         6,000 =      24,000 d. Now, Revised depreciation = (revised book value at the beginning-revised salvage)/revised remaining life = (24000-6000)/3 =         6,000 Estimated life is revised in total at 5. 2 years of life has passed.So , 3 years pf life is remained.