91Ó°ÊÓ

Depreciation can be stated as the decline in the value of an asset over a useful period. All assets depreciate over time, except for land, whose value increases with the passage of time. Among the various methods of depreciation, straight-line depreciation is considered to be the simplest and error-free method.

Since changes in estimations are handled in the current and prospective periods, no corrective entry is required.

Working Notes:

Computing revised depreciation expenses

Working Notes:

Calculation of accumulated depreciation

$\begin{array}{rcl}\text{Accumulated}\text{depreciation}& =& \frac{\text{Acquisition}\text{cost}-\text{Salvage}\text{value}}{\text{Estimated}\text{life}}×\text{Depreciation}\text{year}\\ & =& \frac{\$60,000-\$4,000}{8}×5\\ & =& \$35,000\end{array}$

Calculation of depreciation expense

$\begin{array}{rcl}\text{Depreciation}\text{expense}& =& \frac{\text{Depreciable}\text{assets}}{\text{Remaining}\text{useful}\text{life}}\\ & =& \frac{\$20,500}{5}\\ & =& \$4,100\end{array}$