**Revised Depreciation**On January 2, 2016, the Fish Band acquires sound equipment for concert performances at a cost of $65,800. The band estimates it will use this equipment for four years. It estimates that after four years it can sell the equipment for $2,000. Fish Band uses straight-line depreciation but realizes at the start of 2017 that due to concert bookings beyond expectations, this equipment will last only a total of three years. The salvage value remains unchanged. Compute the revised depreciation for both the second and third years.

Answered: Revised Depreciation On January 2,…

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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**Revised Depreciation**

On January 2, 2016, the Fish Band acquires sound equipment for concert performances at a cost of $65,800. The band estimates it will use this equipment for four years. It estimates that after four years it can sell the equipment for $2,000. Fish Band uses straight-line depreciation but realizes at the start of 2017 that due to concert bookings beyond expectations, this equipment will last only a total of three years. The salvage value remains unchanged. Compute the revised depreciation for both the second and third years.

Expert Solution

Step 1: Introduce to depreciation expense

Depreciation expense :— It is the allocation of depreciable cost of asset over the estimated useful life of asset. The depreciable cost of asset is the difference between original cost of asset and estimated residual value. Annual depreciation expense using straight line method is calculated by dividing depreciable cost of asset by estimated useful life.

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