Nicholson Company purchased equipment on January 1, 2015, for €28,000 with an estimated residual value of €7,000 and estimated useful life of 8 years. On January 1, 2017, 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:

Question

Quizplus · Accepted Answer

The original annual depreciation was (€28,000 - €7,000) / 8 = €2,625. After 2 years, accumulated depreciation is €5,250. The book value at the start of 2017 is €28,000 - €5,250 = €22,750. The remaining life is 10 years (12 total - 2 used). The new annual depreciation is (€22,750 - €7,000) / 10 = €1,575.

Nicholson Company Purchased Equipment on January 1, 2015, for €28,000