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B Co acquired a non-current asset on 1 January 20X2 for $80,000. It had no residual value and a useful
life of 10 years.
On 1 January 20X5 the total useful life was reviewed and revised to 7 years.
What will be the depreciation charge for 20X5?After 3 years’ depreciation (X2, X3 and X4) (3 x $8,000) the asset now has a carrying value of $80,000 – $24,000 = $56,000
If the TOTAL useful life is now reduced from 10 years to 7 years, and 3 of those 7 have already gone, then the remaining useful life is just 4 more years.
$56,000 / 4 = $14,000
Depreciation for 20X5 is therefore $14,000
OK?
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