On January 1, 2019, Romero Company purchased equipment for $320,000 The equipmen

Question

On January 1, 2019, Romero Company purchased equipment for $320,000 The equipment was assigned an $18,000 residual value and a 16-year life. Romero Company will use the straight-line method to depreciate the equipment. On January 1, 2026, Romero Company spent $41,000 to overhaul the equipment. This capital expenditure resulted in Romero Company changing the life of the equipment from 16 years to 30 years and adjusting the residual value to be $7,500 at the end of the 30 years. Calculate the book value of the equipment at December 31, 2028

Explanation / Answer

Dear Student Thank you for using Chegg Please find below the answer Statementshowing Computations Paticulars Amount Purchase cost on jan 01'2019         320,000.00 Residual Value            18,000.00 Life in years                    16.00 Depreciation per year = (320,000-18000)/16            18,875.00 Depreciation for 7 Years = 2019 to 2025 = 18875 *7         132,125.00 Carrying value on jan 01 '2026 = 320,000 - 132,125         187,875.00 Capital Expenditure            40,000.00 Total Book value         227,875.00 Remaining life = 30 - 7                    23.00 Salvage Value              7,500.00 Depreciation per year from 2026= (227,875-7500)/23              9,581.52 Depreciation for 3 years = 2026 to 2028 = 9581.52 *3            28,744.57 Book value on Dec 31'2028 = 227875 - 28,744.57         199,130.43

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