Wong purchased a computer for $15 000, net of GST. Originally it had an estimated useful life of 4 years and a residual value of $3000. The straight-line method is used. At the start of the third year of usage Wong revised the life of the computer to a total life of 6 years. The residual value had not changed. What depreciation expense should be recorded for the computer for year 3?

Question

Quizplus · Accepted Answer

The depreciation expense for the first two years is calculated based on the original estimate: ($15,000 - $3,000) / 4 = $3,000 per year. After 2 years, $6,000 has been depreciated. The book value at the start of year 3 is $15,000 - $6,000 = $9,000. With the revised life total of 6 years and 2 years already passed, there are 4 years left. The depreciation expense for year 3, with the residual value still at $3,000, is ($9,000 - $3,000) / 4 = $1,500.

Wong Purchased a Computer for $15 000, Net of GST