Answer:
$26,320
Explanation:
The computation of Annual depreciation for years second and third is shown below:
Cost of equipment = $67,800
Useful life = 5 years
Salvage value =$2,000
Depreciation cost = Cost - Salvage value
= $67,800 - $2,000
= $65,800
Annual depreciation under Straight line method = Depreciable cost ÷ Useful life
= $65,800 ÷ 5 Years
= $13,160
Mathews Band predicts after 1 year that this equipment would last only a total of 3 years.
So, the remaining life of equipment = 3 - 1
= 2 years
Book value of equipment at point of revision
= $67,800 - $13,160
= $54,640
Remaining depreciable cost = Book value at point of revision - Salvage value
= $54,640 - $2,000
= $52,640
Annual depreciation for years Second and third = Remaining depreciable cost ÷ Remaining useful life
= $52,640 ÷ 2
= $26,320