Ron's Quik Shop bought machinery for $75,000 on January 1, 2014. Ron estimated the useful life to be 5 years with no salvage value, and the straight-line method of depreciation will be used. On January 1, 2015, Ron decides that the business will use the machinery for a total of 6 years. What is the revised depreciation expense for 2015?

Question

Quizplus · Accepted Answer

The revised depreciation expense for 2015 is $12,000. This is because the useful life of the machinery has been revised from 5 years to 6 years, which means that the annual depreciation expense will be lower. The annual depreciation expense is calculated by dividing the cost of the machinery by the useful life. In this case, the cost of the machinery is $75,000 and the useful life is 6 years, so the annual depreciation expense is $75,000 / 6 = $12,000.

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