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Q11-7IFRS

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Found in: Page 607

### Intermediate Accounting (Kieso)

Book edition 16th
Author(s) Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield
Pages 1552 pages
ISBN 9781118743201

# Ortiz purchased a piece of equipment that cost $202,000 on January 1, 2017. The equipment has the following components.ComponentCostResidual ValueEstimated Useful LifeA$70,000$7,00010 yearsB50,0005,0005 yearsC82,0004,00012 yearsCompute the depreciation expense for this equipment at December 31, 2017. Answer Total depreciation expense is$21,800.

See the step by step solution

## Step-by-Step SolutionStep 1: Meaning of Residual Value

An estimated worth of a fixed asset when it is no longer useful or after its lease term has expired, is known as residual value. The definition of residual value varies per industry, but the essential idea remains the same.

## Step 2: Computing depreciation expenses

 Component Calculation Depreciation Expense A $6,300 B 9,000 C 6,500$21,800

Notes:

The formula used in depreciation expense is as shown below.