Waterway Industries purchased a depreciable asset for $610000 on January 1, 2018. The estimated salvage value is $61000, and the estimated useful life is 9 years. The straight-line method is used for depreciation. In 2021, Waterway changed its estimates to a total useful life of 5 years with a salvage value of $99000. What is 2021 depreciation expense

The depreciation charge in 2021 is $ 164,000.00

Explanation:

Annual depreciation charge=cost-salvage value/useful life

cost is $610,000

salvage value is $61,000

useful life is 9 years

Annual depreciation charge = ($610,000-$61,000) / 9=$61000

The depreciation of charge of $61000 is applicable to years 2018,2019 and 2020 respectively.

The estimates of the asset changed in the year 2021, hence a new depreciation based on the present book value is required.

revised depreciation charge=$610,000 - ($61,000*3) - $99,000 / (5-3) =

$164,000.00