Reference no: EM132508620
Question1 : Determine depreciation expense for a change in depreciation estimate
The Donut Stop acquired equipment for $19,000. The company uses straight-line depreciation and estimates a residual value of $3,000 and a four-year service life. At the end of the second year, the company estimates that the equipment will be useful for four additional years, for a total service life of six years rather than the original four. At the same time, the company also changed the estimated residual value to $1,200 from the original estimate of $3,000.
Required:
Question2 : Calculate how much The Donut Stop should record each year for depreciation in years 3 to 6.
Cost of the equipment$ (19,000 selected answer correct)
Less: Accumulated Depreciation (Years 1 and 2)
Book value, end of year 2
Less: New residual value
New depreciable cost
Remaining service life
Annual depreciation in years 3 to 6$