The Hilton Skating Club used straight-line depreciation for a used Zamboni ice - resurfacing machine that cost $52,000, under the assumption it would have a four-year life and a $6,700 trade - in value. After two years, the club determined that the Zamboni still had three more years of remaining useful life, after which it would have an estimated $4,360 trade - in value. Required: 1. Calculate the Zamboni's book value at the end of its second year. 2. Calculate the amount of depreciation to be charged during each of the remaining years in the Zamboni's revised useful life.
The Hilton Skating Club used straight-line depreciation for a used Zamboni ice - resurfacing machine that cost $52,000, under the assumption it would have a four-year life and a $6,700 trade - in value. After two years, the club determined that the Zamboni still had three more years of remaining useful life, after which it would have an estimated $4,360 trade - in value. Required: 1. Calculate the Zamboni's book value at the end of its second year. 2. Calculate the amount of depreciation to be charged during each of the remaining years in the Zamboni's revised useful life.
Chapter1: Financial Statements And Business Decisions
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Depreciation Methods
The word "depreciation" is defined as an accounting method wherein the cost of tangible assets is spread over its useful life and it usually denotes how much of the assets value has been used up. The depreciation is usually considered as an operating expense. The main reason behind depreciation includes wear and tear of the assets, obsolescence etc.
Depreciation Accounting
In terms of accounting, with the passage of time the value of a fixed asset (like machinery, plants, furniture etc.) goes down over a specific period of time is known as depreciation. Now, the question comes in your mind, why the value of the fixed asset reduces over time.
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Transcribed Image Text:The Hilton Skating Club used straight-line depreciation for a used Zamboni ice - resurfacing machine that cost $52,000, under the assumption it would have a four-year life
and a $6,700 trade - in value. After two years, the club determined that the Zamboni still had three more years of remaining useful life, after which it would have an
estimated $4,360 trade-in value. Required: 1. Calculate the Zamboni's book value at the end of its second year. 2. Calculate the amount of depreciation to be charged
during each of the remaining years in the Zamboni's revised useful life.
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