Galway Ltd purchased a computer for $6,000 2 years ago.At the beginning of this year the motherboard was replaced to maintain its existing service capacity at a cost of $2,000.The improvement to the computer will work only on the existing computer and it does not extend its useful service potential.Galway has been depreciating the equipment using the declining-balance method at a rate of 33 per cent.What is the depreciation charge calculated at the end of the current year (rounded to the nearest dollar)?

Question

Quizplus · Accepted Answer

The current book value of the computer is $6,000 - accumulated depreciation = $6,000 - (33% x $6,000 x 2) = $2,010. 
Since the improvement does not increase the useful service potential, we will not add the $2,000 cost to the book value. 
Therefore, the depreciation charge for the current year will be 33% x $2,010 = $662.70, which rounded to the nearest dollar is $1,549.

Galway Ltd Purchased a Computer for $6,000 2 Years Ago