Change in Estimate: Depreciation Video Lessons

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Problem: F Company purchased equipment on January 1 for $82,000. The machines are estimated to have a 5-year life and a salvage value of $4,000. The company uses the straight-line depreciation method. If the original expected life remained the same (i.e., 5-years), but at the beginning of year 4, the salvage value was revised to $8,000, the annual depreciation expense for each of the remaining years would be: a. $5,440. b. $27,200. c. $13,600. d. $14,800.

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Problem Details

F Company purchased equipment on January 1 for $82,000. The machines are estimated to have a 5-year life and a salvage value of $4,000. The company uses the straight-line depreciation method. If the original expected life remained the same (i.e., 5-years), but at the beginning of year 4, the salvage value was revised to $8,000, the annual depreciation expense for each of the remaining years would be:

a. $5,440.

b. $27,200.

c. $13,600.

d. $14,800.

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Based on our data, we think this problem is relevant for Professor Galvan's class at UIC.