Rotan Company purchased a van on January 1,2018,for $810,000.Estimated life of the van was five years,and its estimated residual value was $98,000.Rotan uses the straight-line method of depreciation.At the beginning of 2020,the company revised the total estimated life of the asset from five years to six years.The estimated residual value remained the same as estimated earlier.Calculate the depreciation expense for 2020.

Question

Quizplus · Accepted Answer

Depreciation per year = (Cost - Residual value) / Useful life
Depreciation per year = ($810,000 - $98,000) / 5 = $142,400
Depreciation provided in the books = $142,400 × 2 years = $284,800
Revised depreciation for the year 2020 = ($810,000 - $284,800 - $98,000) / 4 years = $106,800

Rotan Company Purchased a Van on January 1,2018,for $810,000