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Lecture 25

# COMMERCE 1AA3 Lecture Notes - Lecture 25: 6 Years, Intellectual Property

Department
Commerce
Course Code
COMMERCE 1AA3
Professor
Lecture
25

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Wednesday, November 8, 2017
Chapter 6
On January 1, 2001 ABC purchased a truck
for \$40,000 with an estimated useful life of
6 years and salvage value of \$10,000. On
December 15, 2004, ABC revised its
estimate of useful life to 8 years and of
salvage value to \$5,000. Calculate the
depreciation expense for 2004 assuming
ABC uses straight line method to amortize
the truck.
The book value of the asset as of the beginning of the accounting
period i which the estiates chage (does’t atter what da the
estimate changes)
Book value as of 1/1/2004= cost-AD
Annual depreciation expense = (40,000 10,000)/6 years = 5,000
AD as of 1/1/2004 = 5,000 X 3 = 15,000
BV = 40,000 15,000 = 25,000
Depreciation expense for 2004 = (BV as of 1/1/04 New SV / remaining
useful life
Remaining useful life = 5 years
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