Don's Copy Shop bought equipment for $450,000 on January 1, 2014. Don estimated the useful life to be 3 years with no salvage value, and the straight-line method of depreciation will be used. On January 1, 2015, Don decides that the business will use the equipment for a total of 5 years. What is the revised depreciation expense for 2015?

Question

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The original depreciation was $150,000 per year ($450,000/3 years). After one year, $150,000 is already depreciated, leaving $300,000. With the revised useful life of 5 years, 4 years remain. The new annual depreciation is $75,000 ($300,000/4 years).

Don's Copy Shop Bought Equipment for $450,000 on January 1