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An item of equipment cost $90000 and has an expected residual value of $ 10000. Its expected life was originally ten years. It is depreciated by the straight line method. After three years, the expected remaining useful life of the asset was revised to just three more years from the end of year 3, and the expected residual value was reduced from $10000 to $8000. What will be the annual depreciation charge in year 3?
When we bought equipment, depreciation for year should be:
($90000-$10000)/10 years = $8000 p.a.In every year from 1st to 3rd inclusive annual depreciation charge will be $8000.
All changes happens after 3rd year, so I think we don’t need to recalculate depreciation..Who has another thoughts, please share!
from your questions it looks policy is changed after 3rd years.. so 3rd year depreciation will be same as above calculated..
No No . The question is asking for the 3rd year Annual depreciation charge after the changes that occurred .
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total depn for 3 years = 3 x (90,000 – 10,000)/10 = 24,000
net book value after 3 yrs = 90,000 – 24,000 = 66000revised depn/yr onwards = (66,000 – 8000)/3 = 19,333 ??
the annual depreciation charge will be 8-000 for the third year as calculated by sangria9. at the end of year 3 the asset was given 3 more years which means it was left with 7 years and 3 more years were added leaving the asset with useful life of 10 years again after year 3 . the annual depreciation charge thereafter will be (66000- 8000)/10 = $ 5800. what do you think trea2401?
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