An asset was purchased for $120,000 on january 1, year 1 and originally estimated to have a useful life of 10 years with a residual value of $10,000. at the beginning of the third year, it was determined that the remaining useful life of the asset was only 4 years with a residual value of $2,000. calculate the third-year depreciation expense using the revised amounts and straight-line method.

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Business

Mike Mcmillan

21 December, 12:33

An asset was purchased for $120,000 on january 1, year 1 and originally estimated to have a useful life of 10 years with a residual value of $10,000. at the beginning of the third year, it was determined that the remaining useful life of the asset was only 4 years with a residual value of $2,000. calculate the third-year depreciation expense using the revised amounts and straight-line method.

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Jordan Dunn · Answer 1

Asset: 120,000

Year 1: estimated useful life of 10 years. residual value of 10,000

120,000 - 10,000 = 110,000 / 10 years = 11,000 annual depreciation.

Start of year 3.

estimated useful life of 4 years. residual value of 2,000

120,000 - 2,000 = 118,000 / 4 = 29,500 annual depreciation.

29,500 x 2 = 59,000

11,000 x 2 = 22,000

59,000 - 22,000 = 37,000

59,000 + 37,000 = 96,000 / 2 = 48,000 annual depreciation for year 3 and year 4.

Beginning Balance: 120,000

Less: Depreciation:

Year 1 11,000

Year 2 11,000

Year 3 48,000

Year 4 48,000 (118,000)

Residual Value 2,000