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Lundholm Company purchased a machine for $100,000 on January 1, 2019. Lundholm depreciates machines of this type by the straight-line method over a 10-year period using no salvage value. Due to a change in sales patterns, on January 1, 2021, management determines the useful life of the machine to be a total of five years. What amount should Lundholm record for depreciation expense for 2021? The tax rate is 25%.

Respuesta :

Answer:

$26,667

Explanation:

Cost of machine - 100,000

Initial useful life -10 years

Depreciation method = straight line

Annual depreciation = 100000/10 = 10,000

Depreciation on December 31 2019 = 10,000

Depreciation on December 2020 = 10000

Accumulated depreciation = 20,000

Carrying value at Jan 1 , 2021 = (100000-20000)-80000

Change in useful life = 5 years

Outstanding useful life = (5-2) = 3 years.

Depreciation for 2021 = 80000/3 = $26,667

Note that change in depreciation method can not be applied retrospectively

The amount should Lundholm record for depreciation expense for 2021 is $26,667

Given that,

  • The Cost of the machine - 100,000
  • Initial useful life -10 year
  • Depreciation method = straight line

calculation;

Annual depreciation = 100000 ÷ 10 = 10,000

Now

Depreciation on December 31 2019 = 10,000

Depreciation on December 2020 = 10000

So,

Accumulated depreciation = 20,000

Now

Carrying value at Jan 1 , 2021 = (100000-20000) = 80000

And,

Change in useful life = 5 years

So,

Outstanding useful life = (5-2) = 3 years.

Now

Depreciation for 2021 = 80000  ÷3 = $26,667

Learn more about the depreciation here: https://brainly.com/question/7873736?referrer=searchResults

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