rmer Company purchased machine on January 1, Year 1 for $91,000. The machine is estimated to have a 5-year life and a salvage value of $12,000. The company uses the straight-line method. the beginning of Year 4, Farmer revised the expected life to eight years. What is the annual amount of depreciation expense for each of the remaining years in the machine's life? Multiple Choice

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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**Depreciation and Asset Management**

**Scenario:**

Farmer Company purchased a machine on January 1, Year 1, for $91,000. The machine is estimated to have a 5-year life and a salvage value of $12,000. The company uses the straight-line method for depreciation.

However, at the beginning of Year 4, Farmer Company revised the expected life of the machine to eight years. What is the annual amount of depreciation expense for each of the remaining years in the machine's life?

**Multiple Choice Options:**

- $6,320
- $3,950
- $8,720
- $5,450

**Explanation:**

This is a scenario where the company re-evaluates the useful life of an asset, a common need in financial and managerial accounting. You are required to calculate the revised annual depreciation using the straight-line method given that the original life estimation has changed. Calculate the new annual expense and choose the correct option based on the given data.
Transcribed Image Text:**Depreciation and Asset Management** **Scenario:** Farmer Company purchased a machine on January 1, Year 1, for $91,000. The machine is estimated to have a 5-year life and a salvage value of $12,000. The company uses the straight-line method for depreciation. However, at the beginning of Year 4, Farmer Company revised the expected life of the machine to eight years. What is the annual amount of depreciation expense for each of the remaining years in the machine's life? **Multiple Choice Options:** - $6,320 - $3,950 - $8,720 - $5,450 **Explanation:** This is a scenario where the company re-evaluates the useful life of an asset, a common need in financial and managerial accounting. You are required to calculate the revised annual depreciation using the straight-line method given that the original life estimation has changed. Calculate the new annual expense and choose the correct option based on the given data.
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Section 179 Deduction and Modified Accelerated Cost Recovery System (MACRS) Depreciation
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