What is the remaining useful life after the improvements? The improvements also extend their useful lives by two additional years. However, after depreciating them for two years, the company makes improvements to the trucks that allow them to be used outdoors in what can be harsh winters. As an asset category, the trucks were bought at the same time and had original useful lives of seven years. You find out that the useful lives for the fork trucks need to be adjusted. You work for Georgia-Pacific as an accountant in charge of the fixed assets subsidiary ledger at a warehouse facility in Pennsylvania. Georgia-Pacific is a global company that employs a wide variety of property, plant, and equipment assets in its production facilities. These revised calculations show that Kenzie should now be recording a depreciation of $4,640 per year for the next five years. The revised depreciation expense is calculated as shown: Kenzie uses straight-line depreciation.Īfter three years, Kenzie determines that the estimated useful life would have been more accurately estimated at eight years, and the salvage value at that time would be $6,000.Its economic life was originally estimated to be five years.Its salvage value was originally estimated to be $10,000.To work through this process with data, let’s return to the example of Kenzie Company. For this entry, the remaining depreciable balance of the net book value is allocated over the new useful life of the asset. When this occurs, the depreciation expense calculation should be changed to reflect the new (more accurate) estimates. Over time, these estimates may be proven inaccurate and need to be adjusted based on new information. Revision of Remaining Life or Salvage ValueĪs you have learned, depreciation is based on estimating both the useful life of an asset and the salvage value of that asset. A long-term asset may lose its value, or a company may sell a long-term asset. For example, a company may realize that its original estimate of useful life or salvage value is no longer accurate. A company will account for some events for long-term assets that are less routine than recording purchase and depreciation or amortization.
0 Comments
Leave a Reply. |
AuthorWrite something about yourself. No need to be fancy, just an overview. ArchivesCategories |