On January 1, the Matthews Band pays $67,800 for sound equipment. The band estimates it will use this equipment for five years and after five years it can sell the equipment for $2,000. Matthews Band uses straight-line depreciation but realizes at the start of the second year that this equipment will last only a total of three years. The salvage value is not changed. Compute the revised depreciation for both the second and third years.

$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

answer; coefficient of correlation;