Rogers Company purchased a tooling machine on January 3, 2008 for $700,000. The machine was being depreciated on the straight-line method over an estimated useful life of 10 years, with no salvage value. At the beginning of 2015, the company paid $175,000 to overhaul the machine. As a result of this improvement, the company estimated that the useful life of the machine would be extended an additional 5 years (15 years total). What should be the depreciation expense recorded for the machine in 2015?

Question

Quizplus · Accepted Answer

The original cost of the machine was $700,000, depreciated over 10 years, which equals $70,000 per year. By 2015, the machine would have been depreciated for 7 years (2008-2014), totaling $490,000. The overhaul cost of $175,000 in 2015 increases the book value to $385,000 ($700,000 - $490,000 + $175,000). The revised total useful life is now 15 years, with 8 years remaining (2015-2022). The new depreciation expense is $385,000 / 8 = $48,125.

Rogers Company Purchased a Tooling Machine on January 3, 2008