Ron's Quik Shop bought machinery for $75,000 on January 1, 2013. Ron estimated the useful life to be 5 years with no residual value, and the straight-line method of depreciation will be used. On January 1, 2014, Ron decides that the business will use the machinery for a total of 6 years. What is the revised depreciation expense for 2014?

Question

Quizplus · Accepted Answer

The revised depreciation expense for 2014 is $12,000. The original depreciation expense was $15,000 ($75,000 / 5 years). When the useful life is extended to 6 years, the depreciation expense is reduced to $12,500 ($75,000 / 6 years). However, since the depreciation expense for 2013 was already $15,000, the revised depreciation expense for 2014 is only $12,000 ($12,500 - $15,000).

Ron's Quik Shop Bought Machinery for $75,000 on January 1