Nicholson Company purchased equipment on January 1 2015 for $80000 with an estimated salvage value of $20000 and estimated useful life of 8 years. On January 1 2017 Nicholson decided the equipment will last 12 years from the date of purchase. The salvage value is still estimated at $20000. Using the straight-line method the new annual depreciation will be:

Question

Quizplus · Accepted Answer

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

Nicholson Company Purchased Equipment on January 1 2015 for $80000