Revision of estimated useful life LO 62 66 On January 1 2018

Revision of estimated useful life LO 6-2, 6-6 On January 1, 2018, Poultry Processing Company purchased a freezer and related installation equipment for $69,600. The equipment had a three-year estimated life with a $4,800 salvage value. Straight-line depreciation was used. At the beginning of 2020, Poultry Processing revised the expected life of the asset to four years rather than three years. The salvage value was revised to $3,800. Required Compute the depreciation expense for each of the four years, 2018–2021.

Solution

Calculate depreciation expense :

Depreciation expense (2018 to 2019) = (69600-4800/3) = 21600 per year

Depreciation expense (2020 to 2021) = (69600-43200-4800)/2 = 10800 per year