Nicholson Company purchased equipment on January 1, 2013, for $80,000 with an estimated salvage 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 salvage value is still estimated at $20,000. Using the straight-line method the new annual depreciation will be:

Question

Quizplus · Accepted Answer

The equipment's book value on January 1, 2015, is $60,000 ($80,000 - $20,000 - 2 years of $7,500 depreciation). With 10 years remaining (12 total - 2 used), the new annual depreciation is ($60,000 - $20,000) / 10 = $4,000.

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