On January 1, the Matthews Band pays $65,200 for sound equipment. The band estimates it will use this equipment for five years and after five years it can sell the equipment for $2,000. Matthews Band uses straight-line depreciation but realizes at the start of the second year that this equipment will last onlya total of three years. The salvage value is not changed. Compute the revised depreciation for both the second and third years. Book value at point of revision 23,925 Remaining depreciable cost 49,850 Depreciation per year for years 2 and 3 23,925 %24 %24 %24
On January 1, the Matthews Band pays $65,200 for sound equipment. The band estimates it will use this equipment for five years and after five years it can sell the equipment for $2,000. Matthews Band uses straight-line depreciation but realizes at the start of the second year that this equipment will last onlya total of three years. The salvage value is not changed. Compute the revised depreciation for both the second and third years. Book value at point of revision 23,925 Remaining depreciable cost 49,850 Depreciation per year for years 2 and 3 23,925 %24 %24 %24
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:On January 1, the Matthews Band pays $65,200 for sound equipment. The band estimates it will use this equipment for five years and
after five years it can sell the equipment for $2,000. Matthews Band uses straight-line depreciation but realizes at the start of the
second year that this equipment will last onlya total of three years. The salvage value is not changed.
Compute the revised depreciation for both the second and third years.
Book value at point of revision
23,925
Remaining depreciable cost
49,850
Depreciation per year for years 2 and 3
23,925
%24
%24
%24
Expert Solution
Step 1
Depreciation is a reduction in the value of assets due to the usage of that asset. We can evaluate the depreciation expense with the help of the double decline method, straight-line method, production method, etc.
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