Jack's Copy Shop bought equipment for $150,000 on January 1, 2013. Jack estimated the useful life to be 3 years with no salvage value, and the straight-line method of depreciation will be used. On January 1, 2014, Jack decides that the business will use the equipment for a total of 5 years. What is the revised depreciation expense for 2014?
A) $50,000.
B) $20,000.
C) $25,000.
D) $37,500.

Question

Quizplus · Accepted Answer

The equipment was initially depreciated over 3 years, so the annual depreciation was $50,000 ($150,000/3). After 1 year, the book value is $100,000. With a revised useful life of 5 years total, there are 4 years remaining. The new annual depreciation is $25,000 ($100,000/4).

Jack's Copy Shop Bought Equipment for $150,000 on January 1