Penny Lane and Associates purchased a generator on January 1, 2015, for $6,300. The generator was estimated to have a five-year life and a salvage value of $600. At the beginning of 2017, the company revised the expected life of the asset to six years and revised the salvage value to $300. Using straight-line depreciation, the depreciation expense recorded in 2017 would

The depreciation expense recorded in 2017 will be $930

Explanation:

Cost of the generator = $6,300

Initial useful life = 5 years

initial salvage value = $600

Revised useful life = 6 years

Revised salvage value = $300

Now,

Initial Annual depreciation = [ Cost - Initial salvage value ] : Initial useful life

= [ $6,300 - $600 ] : 5

= $1,140

Therefore,

accumulated depreciation till the end of 2016

= 2 * $1,140

= $2,280

Therefore,

Book value for the year 2017

= Cost - accumulated depreciation till the end of 2016

= $6,300 - $2,280

= $4,020

Therefore,

The revised annual depreciation

= [ Book value for 2017 - Revised salvage value ] : Remaining useful life

= [ $4,020 - $300 ] : (6 - 2)

= $930

Hence,

the depreciation expense recorded in 2017 will be $930