FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Problem 6-28A (Algo) Revision of estimated useful life of tangible assets LO 6-6
Banger Company purchased delivery equipment for $45,000 on January 1, Year 1. Banger estimated that the delivery equipment
would have a life of five years and a $3,000 salvage value. Banger uses the straight-line method to compute the depreciation
expense. At the beginning of year 4, Banger revised the useful life of the delivery equipment to be a total of seven years. The
estimated salvage value was not changed. Compute the depreciation expense for each of the seven years.
Years
Year 1
Year 2
Year 3
Year 4
Year 5
Year 6
Year 7
Depreciation
Expense
$
$
$
8,400
8,400
8,400
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Transcribed Image Text:ook int ences Problem 6-28A (Algo) Revision of estimated useful life of tangible assets LO 6-6 Banger Company purchased delivery equipment for $45,000 on January 1, Year 1. Banger estimated that the delivery equipment would have a life of five years and a $3,000 salvage value. Banger uses the straight-line method to compute the depreciation expense. At the beginning of year 4, Banger revised the useful life of the delivery equipment to be a total of seven years. The estimated salvage value was not changed. Compute the depreciation expense for each of the seven years. Years Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Depreciation Expense $ $ $ 8,400 8,400 8,400
Expert Solution
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Step 1: Explanation of Straight line Depreciation method

Straight-line depreciation evenly spreads the cost of an asset over its useful life, resulting in a consistent annual expense.

It simplifies accounting by allocating a portion of the asset's value as an expense each year until its estimated value reaches zero.

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