### Depreciation Calculation Example**Problem:**Equipment costing $80,000 with a salvage value of $11,000 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 year 3 would be:- $20,917.- $17,250.- $10,350.- $14,450.**Solution Steps:**1. **Calculate Original Annual Depreciation:** - Cost of Equipment: $80,000 - Salvage Value: $11,000 - Estimated Life: 8 years \[ \text{Annual Depreciation} = \frac{\text{Cost} - \text{Salvage Value}}{\text{Estimated Life}} = \frac{80,000 - 11,000}{8} = \frac{69,000}{8} = \$8,625 \]2. **Determine Total Depreciation for First 2 Years:** \[ \text{Total Depreciation (2 years)} = 8,625 \times 2 = \$17,250 \]3. **Calculate Revised Depreciation Expense:** - Remaining Value at Start of Year 3 (after 2 years of depreciation): \[ \text{Remaining Value} = \text{Cost} - \text{Accumulated Depreciation} = 80,000 - 17,250 = \$62,750 \] - Revised Remaining Life: 5 years (total) - 2 years (already depreciated) = 3 years - Revised Annual Depreciation: \[ \text{Revised Annual Depreciation} = \frac{\text{Remaining Value} - \text{Salvage Value}}{\text{Revised Remaining Life}} = \frac{62,750 - 11,000}{3} = \frac{51,750}{3} = \$17,250 \]**Answer:**\[\$17,250\]**Correct Choice:**- $17,250.

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Description: ### Depreciation Calculation Example**Problem:**Equipment costing $80,000 with a salvage value of $11,000 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

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Equipment costing $80000 with a salvage value of $11000 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 year 3 would be O $20917. O $17250. O $10350. O $14450.

Equipment costing $80000 with a salvage value of $11000 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 year 3 would be O $20917. O $17250. O $10350. O $14450.

Financial Accounting: The Impact on Decision Makers

10th Edition

ISBN:9781305654174

Author:Gary A. Porter, Curtis L. Norton

Publisher:Gary A. Porter, Curtis L. Norton

Chapter8: Operating Assets: Property, Plant, And Equipment, And Intangibles

Section: Chapter Questions

Problem 8.6DC

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