### Depreciation Calculation Example**Problem Statement:**Equipment with a cost of $95,550, an estimated residual value of $4,550, and an estimated life of 13 years was depreciated by the straight-line method for 5 years. Due to obsolescence, it was determined that the remaining useful life should be shortened by 3 years and the residual value changed to zero. The depreciation expense for the current and future years is:- a. $35,000- b. $12,110- c. $7,569- d. $4,658 To educate students on how to approach solving this problem, let's break it down step by step:1. **Initial Depreciation Calculation:** - Cost of equipment: $95,550 - Estimated residual value: $4,550 - Estimated useful life: 13 years - Depreciable amount = Cost - Residual Value = $95,550 - $4,550 = $91,000 - Yearly depreciation expense = Depreciable amount / Useful life = $91,000 / 13 ≈ $7,000 per year For the first 5 years: - Total depreciation for 5 years = Yearly Depreciation Expense * 5 = $7,000 * 5 = $35,000 - Book value after 5 years = Cost - Accumulated Depreciation = $95,550 - $35,000 = $60,5502. **Adjusting for Obsolescence:** - Remaining useful life after the adjustment: 13 years - 5 years (already depreciated) - 3 additional years reduced = 5 years remaining - Revised residual value: $0 (changed due to obsolescence) - New depreciable amount = Book Value (after 5 years depreciation) - Revised Residual Value = $60,550 - $0 = $60,550 - New yearly depreciation expense = New Depreciable Amount / Remaining Useful Life = $60,550 / 5 ≈ $12,110 per year**Conclusion:** The correct depreciation expense for the current and future years is:- **b. $12,110**This example illustrates the process of handling depreciation changes due to new information about an asset's useful life and residual value.

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Description: ### Depreciation Calculation Example**Problem Statement:**Equipment with a cost of $95,550, an estimated residual value of $4,550, and an estimated life of 13 years was depreciated by the straight-line method for 5 years. Due to obsolescence, it was

Depreciation as per straight line method is given as under: = (Original cost - Salvage value) ÷…

Business

Accounting

Equipment with a cost of $95,550, an estimated residual value of $4,550, and an estimated life of 13 years was depreciated by the straight-line method for 5 years. Due to obsolescence, it was determined that the remaining useful life should be shortened by 3 years and the residual value changed to zero. The depreciation expense for the current and future years is Oa. $35,000 Ob. $12,110 Oc. $7,569 Od. $4,658

Equipment with a cost of $95,550, an estimated residual value of $4,550, and an estimated life of 13 years was depreciated by the straight-line method for 5 years. Due to obsolescence, it was determined that the remaining useful life should be shortened by 3 years and the residual value changed to zero. The depreciation expense for the current and future years is Oa. $35,000 Ob. $12,110 Oc. $7,569 Od. $4,658

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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