Depreciation Calculation: Change in Useful Life and Salvage Value
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Machinery purchased for $60,000 by Tom Brady Co. in 2003 (Joe Montana Co. in 2000) was originally estimated to have a life of 8 years with a salvage value of $4,000 at the end of that time. Depreciation has been entered for 5 years on this basis. In 2008, it is determined that the total estimated life should be 10 years with a salvage value of $4,500 at the end of that time. Assume straight-line depreciation. Prepare the entry to correct the prior years' depreciation, if necessary. Prepare the entry to record depreciation for 2008.
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Solution Summary
The solution explains how to calculate the revised depreciation given a change in useful life and salvage value.
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The cost is 60,000
Original life is 8 years and the salvage value is 4,000
The depreciation per year is (60,000-4,000)/8 = 7,000 per year
The machine is depreciated for 5 years on this basis. Total amount of depreciation charged is ...
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