Lorenzo Corporation purchased equipment on January 1, 2016 for $600,000. The equipment had an estimated useful life of 5 years and an estimated salvage value of $10,000. After using the equipment for 2 years, the company determined that the equipment could be used for an additional 6 years and have a salvage value of $2000. Assuming Lorenzo Corporation uses straight-line depreciation, compute depreciation expense for the year ending December 31, 2018. (Round your final answer to the nearest dollar.)

Question

Quizplus · Accepted Answer

The original annual depreciation was ($600,000 - $10,000) / 5 = $118,000. After 2 years, accumulated depreciation is $236,000. The new book value is $600,000 - $236,000 = $364,000. The new depreciation is ($364,000 - $2,000) / 6 = $60,333.33, rounded to $60,333.

Lorenzo Corporation Purchased Equipment on January 1, 2016 for $600,000