Proctor Paper Products purchased a machine on January 1, 2017 at a cost of $380,000 with an estimated residual value of $30,000 at the end of its estimated useful life of 8 years. On January 1, 2013 Proctor Paper estimates that the machine only has a remaining life of 5 years and a residual value of $20,000. Proctor Paper uses straight-line depreciation. Depreciation expense for 2019 would be

Question

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The machine's book value at the beginning of 2019 is $380,000 - (6 years * $43,750) = $118,500. With a new useful life of 5 years and a residual value of $20,000, the depreciation expense is ($118,500 - $20,000) / 5 = $19,700 per year. However, since the machine was purchased in 2017, the correct calculation should be based on the remaining book value at the beginning of 2019, which is $380,000 - (2 years * $43,750) = $292,500. The new depreciation expense is ($292,500 - $20,000) / 5 = $54,500.

Proctor Paper Products Purchased a Machine on January 1, 2017