On January 1, 2022, the Sheridan Company ledger shows Equipment $49,700 and Accumulated Depreciation $18,280. The depreciation resulted from using the straight-line method with a useful life of 10 years and a salvage value of $4,000. On this date, the company concludes that the equipment has a remaining useful life of only 2 years with the same salvage value.Compute the revised annual depreciation.

After revision the remaining life of equipment shrank down to 2 years, so the depreciation working will be worked out to adjusted the impact of decreasing of useful life.

As per existing information the depreciation charges are calculated as :

(Cost-Salvage Value)/Useful life= (49700-4000)/10 = 4570

Accumulated Depreciation indicates that 4 years have past by (18280/4570)

now remaining years are 6 which will be reduced to 2 after revision so the new working will be as follows:

Remaining Cost :31420 (49700 -18280)

Salvage Value : 4000

Revised Remaining Useful Life : 2

Revised Calculated Depreciation Annual : (31420-4000)/2 = 13710

It can be further verified through simple math also:

Adding annual depreciation of remaining 2 years : 13710 +13710 =27420

Value available for depreciation after salvage value : 31420 -4000= 27420

Tundexi Tundexi · Answer 2 · 2022-04-01T12:13:17+02:00

The revised annual depreciation for Sheridan Company will be $13,710.

What is the depreciation charges?

= (Cost - Salvage Value) / Useful life

= ($49700 - $4000)/10

= $4570

The Accumulated Depreciation indicates that 4 years have past by (18280/4570)

Now, the remaining 6 years will be reduced to 2 after revision.

Now working

Remaining Cost = ($49700 - $18280)

Remaining Cost = $31420

Salvage Value = 4000

Revised Remaining Useful Life = 2

What is the Revised Calculated Depreciation Annual?

= ($31420 - $4000) / 2

= $13,710

Therefore, the revised annual depreciation for Sheridan Company will be $13,710.