A depreciable asset with a cost of 40200 has a residual...

A depreciable asset with a cost of $40200 has a residual value of $2400 and a useful life of 10 years. Total estimated units of output are 75600 and in year 1 a total of 5200 units were produced. Under the straight-line method and the units-of-activity method the depreciation expense for the first year would be Straight-line Units-of-activity $3780.00 $2765.10 $4020.00 $2765.10 $4020.00 $2600.00 $3780.00 $2600.00

Transcript

00:01 We are given the following information pertaining to the depreciation of an asset that was bought for $20 ,000.

00:08 So we start off with the $20 ,000, which is the value of the asset, which it was bought.

00:19 Now, the other information that is given relates to the salvage value.

00:25 Okay, so we can actually say that this cost price is $20 ,000.

00:31 The salvage value is actually $5 ,000 and an estimated useful life of 10 years.

00:42 So the useful life is actually 10 years.

00:47 So after three years of use, the estimated residual value is revised to $4 ,000, assuming straight line depreciation, depreciation expense in the year four of use.

01:01 Okay, so the first thing we'll need to do is to calculate the depreciation in the first three years.

01:08 So in the first three years, it's obviously going to be if it's a straight -line depreciation, you simply say $20 ,000 minus the salvage value, right, minus the salvage value.

01:22 You divide that by the useful life, which is 10.

01:26 Your answer there would be $20 ,000 minus $5 ,000, $15 ,000.

01:31 By 10, so the depreciation will be $1 ,500 per year.

01:40 Now, this amount is going to change in year four.

01:45 So in year four, the values now shift because now we no longer have $20 ,000 as the caring value, 20 ,000, we no longer want the cost price.

02:00 We are basically now looking at the carrying.

02:02 Value of the asset which happens to be 20 ,000 minus the $1 ,500 because that's will be after the depreciation.

02:12 So, um, 1 ,000.

02:15 So you can basically say the carrying value is $20 ,000 minus three times 1 ,500...