Answer :
Answer:
Explanation:
To calculate the depreciation expense for the year 2026, we need to follow these steps:
1. **Calculate Initial Annual Depreciation (2024-2025):**
- **Cost of Equipment:** $650,000
- **Residual Value:** $10,000
- **Service Life:** 8 years
The formula for straight-line depreciation is:
\[
\text{Annual Depreciation} = \frac{\text{Cost} - \text{Residual Value}}{\text{Service Life}}
\]
\[
\text{Annual Depreciation} = \frac{650,000 - 10,000}{8} = \frac{640,000}{8} = 80,000
\]
Therefore, the annual depreciation expense for 2024 and 2025 is $80,000.
2. **Calculate Accumulated Depreciation by the Beginning of 2026:**
- **Accumulated Depreciation (2024-2025):** $80,000 per year × 2 years = $160,000
3. **Calculate Book Value at the Beginning of 2026:**
\[
\text{Book Value} = \text{Cost} - \text{Accumulated Depreciation} = 650,000 - 160,000 = 490,000
\]
4. **Revised Depreciation for 2026 Onwards:**
- **New Service Life Remaining (from 2026):** 4 years
- **New Residual Value:** $0
\[
\text{Revised Annual Depreciation} = \frac{\text{Book Value}}{\text{Remaining Service Life}} = \frac{490,000}{4} = 122,500
\]
Thus, the depreciation expense the company would report for the year 2026 is **$122,500**.
