How do i calculate this problem. An asset was purchased for $73,000, current acc'd depreciation is $13,800, asset is expected to have a useful life of 8 years, and be sold for an estimated $600, what is the new annual depreciation amount, here is my computation
Purchase price: 73000
Current acc'd dep: (13800)
Residual value: 59200
Salvage value: (600)
New annual dep: 7325 (59200-600)/8
Your computation is correct.
To calculate the new annual depreciation amount, you subtract the salvage value from the residual value and divide it by the useful life of the asset.
Here's the breakdown:
Purchase price: $73,000
Accumulated depreciation: -$13,800 (ensure to subtract since it's an expense)
Residual value: $59,200 (calculated as [$73,000 - $13,800])
Salvage value: -$600 (ensure to subtract since it's an expense)
To calculate the new annual depreciation amount, you divide the difference between the residual value and the salvage value by the useful life of the asset:
New annual depreciation = ($59,200 - $600) / 8
New annual depreciation = $58,600 / 8
New annual depreciation = $7,325
Therefore, the correct new annual depreciation amount for the asset is $7,325.
To calculate the new annual depreciation amount, follow these steps:
Step 1: Determine the depreciable base.
The depreciable base is the amount that the asset's value will depreciate over its useful life. It is calculated by subtracting the estimated salvage value from the initial purchase price. In this case, the salvage value is $600, so the depreciable base is $73,000 - $600 = $72,400.
Step 2: Calculate the new annual depreciation amount.
Divide the depreciable base by the useful life of the asset. In this case, the useful life is 8 years.
$72,400 / 8 = $9,050.
So, the correct calculation for the new annual depreciation amount is $9,050, not $7,325.