Plummer Industries purchased a machine for $43,800 and is depreciating it with the straight-line method over a life of 8 years, using a residual value of $3,000. At the beginning of the sixth year, an extraordinary repair was made costing $7,500, the estimated useful life was extended to 15 years, and no change was made to the estimated residual value.

Tge residual values is $2,580

Explanation:

Given

Cost = $43,800

Time/Life = 8 years

Residual value = $3,000.

First, we calculate the depreciation.

Depreciation is calculated as follows;

Depreciation = (Cost - Residual)/Time

Depreciation = ($43,800 - $3,000)/8

Depreciation = $40,800/8

Depreciation = $5,100

Then we calculate the total depreciation before the beginning of year 6

Total Depreciation = $5,100. * (6 - 1)

Total Depreciation = $5,100 * 5

Total Depreciation = $25,500

So,the net value before year 6 is

Net Value = Cost - Total Depreciation

Net Value = $43,800 - $25,500

Net Value= $18,300

At the beginning of the sixth year, an extraordinary repair was made costing $7,500, so, extended repair value = $7,500 + $18,300 = $25,800

If the estimated useful life was extended to 15 years, then useful life = 15 - 5 = 10 years

Depreciation Expense Year 6 = Extended Repair Value/Useful Life

= $25,800/10

= $2,580

Hence, depreciation = $2,580

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