Waterway Industries purchased machinery on January 2, 2015, for $860000. The straight-line method is used and useful life is estimated to be 10 years, with a $80000 salvage value. At the beginning of 2021 Waterway spent $190000 to overhaul the machinery. After the overhaul, Waterway estimated that the useful life would be extended 4 years (14 years total), and the salvage value would be $40000. The depreciation expense for 2021 should be

Question
Asked Nov 21, 2019
8 views

Waterway Industries purchased machinery on January 2, 2015, for $860000. The straight-line method is used and useful life is estimated to be 10 years, with a $80000 salvage value. At the beginning of 2021 Waterway spent $190000 to overhaul the machinery. After the overhaul, Waterway estimated that the useful life would be extended 4 years (14 years total), and the salvage value would be $40000. The depreciation expense for 2021 should be

check_circle

Expert Answer

star
star
star
star
star
1 Rating
Step 1

Determine the book value at the end of 2020.

Depreciation per year from 2015 to 2020 ($860,000-$80,000)/10 years -$78,000
Accumulated depreciation as of Dec. 31, 2020 $78,000 x 6 years 468,000
Book value at the end of 2020 $860,000-$468,000 =$392,000
help_outline

Image Transcriptionclose

Depreciation per year from 2015 to 2020 ($860,000-$80,000)/10 years -$78,000 Accumulated depreciation as of Dec. 31, 2020 $78,000 x 6 years 468,000 Book value at the end of 2020 $860,000-$468,000 =$392,000

fullscreen
Step 2

Determine deprecitaion e...

Cost to be depreciated from the beginning of 2021 Book value at the end of 2020+ Amount spent to overhaul-Salvage value
Cost to be depreciated from the beginning of 2021 $392,000+$190,000-40, 000
Cost to be depreciated from the beginning of 2021 = $542,000
Deprecitaion expense for 2021 = $542,000/Remainning 8 years of useful life
Deprecitaion expense for 2021 = $67,750
help_outline

Image Transcriptionclose

Cost to be depreciated from the beginning of 2021 Book value at the end of 2020+ Amount spent to overhaul-Salvage value Cost to be depreciated from the beginning of 2021 $392,000+$190,000-40, 000 Cost to be depreciated from the beginning of 2021 = $542,000 Deprecitaion expense for 2021 = $542,000/Remainning 8 years of useful life Deprecitaion expense for 2021 = $67,750

fullscreen

Want to see the full answer?

See Solution

Check out a sample Q&A here.

Want to see this answer and more?

Solutions are written by subject experts who are available 24/7. Questions are typically answered within 1 hour.*

See Solution
*Response times may vary by subject and question.
Tagged in

Business

Accounting

Financial Accounting

Related Accounting Q&A

Find answers to questions asked by student like you

Show more Q&A add
question_answer

Q: Browning Company's sales budget shows the following expected total sales: Month Sales $17,000 Januar...

A: Calculation of cash inflows in April:

question_answer

Q: Waterway Industries produces several products that can be sold at the split-off point or processed f...

A: Step 1: Compute the profit of Waterway Industries after further processing.

question_answer

Q: During the current year, merchandise is sold for $18,300 cash and $295,700 on account. The cost of t...

A: Gross profit:Gross profit can be defined as the profit generated from deducting the cost of goods fo...

question_answer

Q: Optima Company is a high-technology organization that produces a mass-storage system. The design of ...

A: Since we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question and s...

question_answer

Q: Parrish 1-3 #3 I need the equation to solve how to find the amount of Dividends declared Revenue for...

A: Retained earnings: Retained earnings are that portion of profits which are earned by a company but n...

question_answer

Q: Cost of Goods Manufactured, using Variable Costing and Absorption Costing On March 31, the end of th...

A: Hence, $108 is the unit variable cost of goods manufactured. It is obtained by the division of varia...

question_answer

Q: Please need help with how to determined the budgeted unit

A: When the actual units have been given, the budgeted units may be computed by adding or decreasing th...

question_answer

Q: Jennifer Ross, an employee of Hampton Company, worked 43 hours during the week of February 9 through...

A: Compute regular pay, overtime pay, and gross pay.

question_answer

Q: An equipment had a cost of $900,000 with a depreciation amount of $400,000 as at December 31, 2019. ...

A: A fixed asset is impaired if the carrying value of the asset is less than the value in use. Book val...