Do it! review 9-2b swifty corporation purchased a piece of equipment for $66,300. it estimated a 7-year life and $2,500 salvage value. at the end of year 3 (before the depreciation adjustment), it estimated the new total life to be 9 years and the new salvage value to be $5,900. compute the revised depreciation. company uses straight-line depreciation method.

$3,673.015 per year

Explanation:

Initial depreciation = cost - salvage value /number of years

= (66,300 -2500)/7

= 9114.28 per year

Accumulated depreciation  for 3 years= 9114.28× 3 = 27,342.85

Revised depreciation = (66,300 -27,342.85714 -5,900)/9

=$3,673.015 per year

The depreciation for the year 3 is $4,686.

Explanation:

The depreciation formula is given as under:

Depreciation = (Cost - Salvage Value) / Useful Life

Initially

Cost is $66,300.

Salvage value is $2,500.

Useful life is 7 years.

So by putting values, we have:

Depreciation = ($66,300 - $2,500) / 7 years

Depreciation = $9,114

Till the year 2, the yearly depreciation remained the same. At the end of the year 3, the estimates changed which means the use of new estimate would be used to calculate he depreciation.

The New estimates says that the cost is $48,072 (Carrying value$66,300 - $9,114 * 2), estimated life is 9 years and the salvage value is $5,900.

So by putting values, we have:

Depreciation = ($48,072 - $5,900) / 9 years = $4685.77 which is equivalent to $4,686.