Lodging Corporation purchased equipment on January 1, 2010 for $180,000. The equipment had an estimated useful life of 5 years and an estimated salvage value of $30,000. After using the equipment for 2 years, the company determined that the equipment could be used for an additional 6 years and have a salvage value of $9,000. Assuming Lodging Corporation uses straight-line depreciation, compute depreciation expense for the year ending December 31, 2012.

Question

Quizplus · Accepted Answer

Initially, annual depreciation was ($180,000 - $30,000) / 5 = $30,000. After 2 years, accumulated depreciation is $60,000. The book value is $180,000 - $60,000 = $120,000. With a new useful life of 6 years and a salvage value of $9,000, the new annual depreciation is ($120,000 - $9,000) / 6 = $18,500.

Lodging Corporation Purchased Equipment on January 1, 2010 for $180,000