Carpenters, Inc., a manufacturing company, acquired equipment on January 1, 2017 for $530,000. Estimated useful life of the equipment was seven years and the estimated residual value was $14,000. On January 1, 2020, after using the equipment for three years, the total estimated useful life has been revised to nine total years. Residual value remains unchanged. The company uses the straight-line method of depreciation. Calculate depreciation expense for 2020. (Round any intermediate calculations to two decimal places, and your final answer to the nearest dollar.)

Question

Quizplus · Accepted Answer

First, calculate the total depreciation up to January 1, 2020: Original cost ($530,000) - Residual value ($14,000) = $516,000 total depreciable amount. Over the original 7-year life, annual depreciation is $516,000 / 7 = $73,714.29. After 3 years, depreciation accumulated is $73,714.29 * 3 = $221,142.86. The book value on January 1, 2020, is $530,000 - $221,142.86 = $308,857.14. With the revised life of 9 total years and 3 years already used, there are 6 years remaining. The remaining depreciable amount is $308,857.14 - $14,000 (residual value) = $294,857.14. Annual depreciation for 2020 and onwards is $294,857.14 / 6 = $49,142.86, rounded to $49,143.