[cberg790]

I missed a day of school and can't figure out how to do this question

On April 3,2011,Finnbar equipment purchased a machine for $178 000. It was assumed that the machine would have a five-year life and a $38000 trade-in value. Early in January of 2014, it was determined that the machine would have a seven-year useful life and the trade-in value would be $20000. Finnbar uses the straight-line mthod to the nearest month for calculating depreciation.

Record depreciation at December 31, 2014, finnbar's year-end. Round to the nearest whole dollar

can you help me figure out how to do this?

[Just Looking]

First compute the depreciation through 12/31/2013 given the original information. Second, determine at 1/1/2104 how many years of useful life are remaining and how much more needs to be depreciated. Since you are using straight-line, equally divide the amount to be depreciated over the remaining years. If you want to show your work, we can check to make sure you are understanding correctly.

I notice your title says "partial year depreciation question" which leads me to think you are unsure how to depreciate the asset since it was bought in April 2011. To do part one, you will compute depreciation for 9 months (April-Dec) in 2011, all of 2012, and all of 2013. 2011 will be 75% of a full year's depreciation. If you are asking because the decision was made on 1/14/2014, the question states to round to the nearest month. Thus, all 12 months (rounds to 1/1/14) will be under the new method.

[cberg790]

is this what I'm supposed to do? Find the depreciation for 2011, 178000-38000/5= 28000 then multiply by 9/12 to get 21000 for the depreciation for 2011 and then use 28000 for 2012 an 2013? The last part of revising the depreciation I can't figure out

[Just Looking]

Right so far. So at the end of 2013, you have depreciated $77,000 (21,000 + 28,000 + 28,000).

Next step, given the new info what is the total amount you will want to depreciate? It was originally $140,000 (178k-38k). What is it now? I want you to figure the total amount that will get depreciated - don't worry yet about what has been depreciated. (i.e. compute as you did the $140,000) How much is left to depreciate? (this new number - $77,000 per above)

You are now told that the asset has a 7 year life. How many years have you depreciated? How many are left?

[cberg790]

k so do I take the 77,000 and subtract it from the 178,000 to get $101,000 left to depreciate? If so I thought then I was supposed to take $101,000-$20,000/4? Because 20,000 is the new residual value and 3 years have been depreciated already

[Just Looking]

Close. $81,000 is correct. You have only depreciated 2 years and 9 months - remember the first year was partial. You have 4 years and 3 months left.

[cberg790]

So it would be 101,000-20,000/ 4.25 to get the depreciation at December 31,2014 to be $19058.82?

[Just Looking]

It would be $19,059 as your question states it should be rounded to the nearest dollar.

[cberg790]

Okay... thank you so much for your help! :)

[Just Looking]

You're welcome. :)