Nicholson Company purchased equipment on January 1, 2013, for €80,000 with an estimated residual value of €20,000 and estimated useful life of 8 years. On January 1, 2015, Nicholson decided the equipment will last 12 years from the date of purchase. The residual value is still estimated at €20,000. Using the straight-line method the new annual depreciation will be:

Question

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The original depreciation was €7,500 per year (€80,000 - €20,000) / 8 years. After 2 years, €15,000 has been depreciated, leaving a book value of €65,000. With a new useful life of 12 years from purchase, 10 years remain. The new annual depreciation is (€65,000 - €20,000) / 10 = €4,500.

Nicholson Company Purchased Equipment on January 1, 2013, for €80,000