Nicholson Company purchased equipment on January 1, 2012, for €28,000 with an estimated residual value of €7,000 and estimated useful life of 8 years. On January 1, 2014, Nicholson decided the equipment will last 12 years from the date of purchase. The residual value is still estimated at €7,000. Using the straight-line method the new annual depreciation will be:

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The equipment's depreciable amount is €21,000 (€28,000 - €7,000). Initially, the annual depreciation was €2,625 (€21,000 / 8 years). After 2 years, €5,250 has been depreciated, leaving a book value of €22,750. With a new useful life of 12 years from purchase, 10 years remain. The new annual depreciation is €1,575 (€22,750 - €7,000) / 10 years.

Nicholson Company Purchased Equipment on January 1, 2012, for €28,000